REINZ: Choosing an apartment could save buyers $1m

First-home buyers may prefer houses over apartments, according to an analysis of the latest sales data, but apartments are the most affordable entry point to some of New Zealand's top suburbs, research from the Real Estate Institute of New Zealand indicates.

REINZ research shows that buyers looking to establish themselves in Auckland Parnell, Epsom and Takapuna suburbs could save more than $1 million by choosing an apartment over a house.

According to REINZ data, the median price for apartments in Parnell was $772,500 compared to a residential median price of $2,067,500 – a difference of $1,295,000. For Epsom the apartment median price was $865,000 compared to a residential median price of $2,100,000 – a difference of $1,235,000 and for Takapuna the median price of an apartment is $817,500 compared to a residential median price of $1,870,000 – a difference of $1,052,500.

REINZ chief executive Bindi Norwell says: "For those wanting to gain an entry point into some of Auckland's top suburbs, considering an apartment rather than a residential property is a much more affordable way of getting into some of these areas.

"Apartments have come a long way in the last 20 years to having top-end fixtures and fittings, eco-friendly/energy saving features and extensive communal areas. A saving of more than $1 million to live in a fantastic location or a good school zone is not something to be ignored."

Other Auckland suburbs highlighted in the REINZ research include:

• Mount Eden – a saving of $970,500

• Grey Lynn – a saving of $867,000

• Freemans Bay – a saving of $750,000

• Remuera – a saving of $656,400.

Ms Norwell says the REINZ report showed significant savings from buying an apartment could also be found in some of Auckland's entry-level suburbs such as:

• East Tamaki – a saving of $527,000

• Mt Wellington – a saving of $442,500

• New Lynn – a saving of $280,000

• Manukau – a saving of $142,500.

While the majority of apartment sales are in the Auckland market there were also significant savings that could be made in other areas across the country including:

• Wellington’s Mount Victoria and Thorndon with savings of $719,750 and $467,328 respectively

• Papamoa Beach and Mt Maunganui with savings of $258,000 and $157,000 respectively

• Whitianga apartments represented a saving of $152,500 when compared to a residential property, and

• Queenstown apartments represented a saving of $894,000 when compared to a residential property – the greatest saving outside of the Auckland region.

The REINZ research, which looked at the median prices for the year 2017, threw up several anomalies. In the Auckland suburb of Orewa the median price for apartments was $11,500 more than a residential property.

"A look at the regions also presented two further anomalies where it's cheaper to buy a residential property rather than an apartment. In Tauranga, it costs $216,250 more to buy an apartment. In Christchurch Central we've seen the same thing - it's $35,000 cheaper to buy a residential property than it is to buy an apartment."

Bayleys national residential manager Daniel Coulson said the figures suggested there was good value to be found in apartments for those looking to down-size and free up capital.

"Many of the markets highlighted in the REINZ report are well established and are typically not those targeted by first-home buyers.

"Much of apartment activity we are seeing in these areas is being driven by those who are looking to downsize in order to free up capital. Many of the apartment buyers in established suburbs such as Epsom and Remuera tend to be long-standing residents who have recently sold up but want to stay in the neighbourhood.

"Buying an apartment allows them to stay next to their friends and enjoy the amenities these suburbs offer as well as free up capital which they can use to go travelling or purchase a bach."

CoreLogic's recent Pain & Gain report indicates that houses and other forms of housing, like townhouses, still resonate more with first-home buyers than apartments.

CoreLogic Head of Research Nick Goodall says: "While we've seen first-home buyers begin to modify their expectations in regards to sacrificing the quarter-acre dream, it's mostly shifted to townhouses and other 'shared wall' properties rather than apartments.

"The latest data shows roughly 10 per cent of apartment sales go to first home buyers, while for flats and houses it’s roughly 23 per cent of each."

After closing completely in the middle of 2017, a gap has re-emerged between the performances of re-sales for houses versus apartments. In the final quarter of 2017, 9.6 per cent of apartment sales were made at a loss, whereas the figure for houses was 3.6 per cent, CoreLogic data shows.

Recent market fatigue has been concentrated in the apartment segment, perhaps where shorter-focused owners are more prevalent. CoreLogic notes, however, that the losses for apartments (and houses) are still low in an historical context and that both of those figures were slightly lower than the previous quarter.

Ms Norwell says: "An apartment may not be the property that a young couple end up living in their whole life, but it allows them the chance to build up equity in their apartment and then further down the track if they plan a family it means that they can then look to make the next step to a larger home with more room

"For first-time buyers apartments are an excellent way to get a foot on the already expensive Auckland property market. Apartments are usually close to public transport and other amenities such as cafes or restaurants, gyms and other retail outlets. But more importantly, they're in a price bracket that people can more realistically afford."

* All figures for 2017