City apartments likely to increase in value as new projects launch.
Almost 4000 new apartments are likely to come on to the Auckland market this year – the highest number in more than a decade.
Commercial real estate company Colliers International says 3800 apartments across 49 developments are expected, a number that could further increase by 2020 when 138 development projects are forecast to be under way.
Alan McMahon, head of research and consulting for Colliers in New Zealand says the absence of the FOMO effect (fear of missing out) has reduced the urgency to buy in the minds of buyers.
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“However, inquiries and sales are recovering as people rationalise that basic demand is still strong,” he says. “Supply is still constrained so medium to long term there’s every reason to think any well-located, designed and built apartment they buy will increase in value over time.”
McMahon does predict median prices will come down in Auckland – not because existing properties will lose value but because many more less expensive and smaller suburban apartments are being built.
Last year, for example, apartments in the CBD had an average sales price of $1.32m (up by 29 per cent from the year before), with city fringe areas such as Grey Lynn, Kingsland, Mount Eden and Newton at an average of $1.28m, or 15 per cent up.
But in the outer suburban market such as Hobsonville, Onehunga, Albany and Stonefields average prices of $824,000 represented only a 12 per cent rise. Aimed at owner-occupiers, these are better quality than the student/investor flats of old.
Luxury apartments currently on the market can fetch up to $10m - especially those with waterfront views, high architectural standards and plenty of amenities beyond a basic gym and pool (wine cellars, party rooms, libraries).
A Colliers survey of buyer confidence shows the market is more optimistic about new apartment builds (net confidence 23 per cent this quarter, up from 11per cent in December), than old apartments (net confidence grew by only eight per cent).
“There is an overall expectation that prices for both new and old apartments, terraced and detached houses will increase,” McMahon says.
Traditionally Aucklanders have preferred single family or town houses to flats, but this is about to change according to Nick Goodall, the head of research at CoreLogic New Zealand, a property information, analytics and services provider.
“Historically houses/flats have consistently outperformed apartments during growth phases. In the most recent growth period though, the growth has been far more comparable,” he says.
“From the beginning of 2012 to the end of 2016 (the period where Auckland properties saw significant growth) houses in [the old] Auckland city grew in value by 81 per cent, while apartments rose by 77 per cent.
“This is the first time we’ve noticed apartment growth at almost the same rate as houses, “ Goodall says. “And as houses are slowing down, there is still some growth, particularly at the smaller - and more affordable - end for apartments.
“It’s the smaller apartments that went through more growth in the recent cycle,” he says. “Very small apartments (under 40sq m) grew in value by 82 per cent, compared to 78 per cent for small apartments (40-70sq m), 74 per cent for medium apartments (71-125sq m), and 69 per cent for apartments over 125 sq m.”
Goodall says the number of apartment sales are still relatively low; in 2017 in the central city there were 962 sales, followed by 95 in Grafton.
“Our analysis of buyers shows apartments continue to be dominated by multiple property owners and are seemingly not popular with first home buyers.”
Goodall says that by owning an apartment people have more to think about because of the unit title ownership: “But with the appropriate due diligence it can still be an acceptable option for buyers.”
