The Auckland city apartment market, pegged as high risk when investors sat on the sidelines when demand from international students evaporated on the back of border closures, is now showing signs of pickup.
It didn’t take long for the wider residential market to pick up speed at the end of lockdown, but the affordable city centre apartment market is now picking up, following in the rest of the residential market.
Agents say that there has been a notable trend in the past two weeks, as buyers put off by the heated prices and crowds in the rest of the residential market over the past two months.
“The apartment market is always slightly behind the residential market, but it’s really picked up the last two weeks,” says Cameron Brain, auction manager for Ray White City Realty.
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“It took a while after lockdown, but now we’ve got bidders on everything. We have nine auctions tomorrow, we’re getting back into the groove of things.”
Brain says that with the return of ex-pats, and renters downsizing from bigger houses into city flats, investors are now coming back into the market as new tenants replace those lost overseas as lockdown began.
Over 55 buyers inspected the apartment at Charlotte Street, Eden Terrace. Photo / Supplied
More significantly, Brain says that first home buyers are coming into the market.
“It’s a real mix, they’re looking at city fringe – Freemans Bay, Eden Terrace, Grafton, Grey Lynn.
“People are getting used to apartments as a real option, it’s ideal living. Gone are the days of having a backyard, we’re more like Sydney or Melbourne where the first home is always an apartment.
“We’re coming to terms with that.”
Brain says that with over 60 sales for the month and a “full listing board” of some 80 properties for sale, the market is up 35 per cent on last year, and he expects a very busy summer market.
Ray White agent Gabriela Galateanu who specialises in the inner-city suburbs, says an auction last week of an apartment she was marketing in 11 Charlotte Street, Eden Terrace surprised everyone when it sold for $721,000.
“We had 55 inspections, 93 enquiries, four registered bidders and three people bidding. It was a complete standout, there were people queuing in the hallway at the open homes. I didn't expect that, the vendors didn’t expect that. We thought high six-hundreds or maybe $700,000. That last $20,000 was [bidding by] two people that really wanted it.”
Apartments in Auckland CBD and city fringe are feeling the positive effects of a wider market revival. Photo / Getty Images
Galateanu said interest was more than double what she would normally expect for an apartment, with buyers being spurred by seeing the crowds and realising they are in a competitive situation in this market too.
While the New York loft-style apartment in a block of 80 had north-facing aspect, away from traffic noise, with a good kitchen, it still had an older bathroom and wasn’t pet-friendly (an increasing demand she’s seeing). She said “perfect staging and incredible marketing” made it stand out.
Galateanu said some buyers have come back to looking at apartments after realising that houses in their price range are miles out of town and they don’t want to cope with lengthy commutes.
“City fringe places like Eden Terrace are starting to pick up as people want to live in the city, close to things but not in the city centre.”
First home buyers are still being slowed up by the bank pre-approval process, which can take three weeks and buyers are also looking closely at body corporate fees that are lower in the fringe (Eden Terrace, for example, is typically $5000 compared to $8000 a year in the city).
“At the start of lockdown, people were so scared, now they just want to buy. There’s definitely a bit of FOMO, they don’t want to miss out.” How to secure a home loan
Stuart Robertson, sales manager for Bayleys Auckland City Living team, says that the apartment middle market, as opposed to the luxury segment, can start with people who are prepared to pay just $300,000 to $400,000 for a lease hold apartment and pay the $14,000 a year lease.
“In the middle market, there are now people who want to buy [an apartment] in town because they are priced out of other houses. It’s a mix of downsizers going for $800,000 to $900,000 newer builds or older character places with a bit of size.”
He says first home buyers are still being caught out by challenges with bank financing, especially stress testing of their ability to service a hypothetical mortgage rate of six or seven percent.
Robertson notes that while apartments in buildings with a lot of comparable flats are unlikely to get huge premiums at auctions, higher end character buildings – where buyers wait for an apartment to come available – can get significant interest at auction.
Robertson also picks Eden Terrace as one of the better apartment markets, desired for its slightly bohemian vibe, close to Symonds Street and K Rd gentrification and – eventually – the city rail link.
“People like places like this, Grafton, Freemans Bay because you’re close to, but not right in, the city, there’s a bit of greenery or parks or trees around.”
The sweet-spot, Robertson says, is the newer developments which have deliberately created green spaces, communities and a real sense of belonging right in the city.
“People will live there a bit longer; they’ll have a real emotional connection. People will look at well-run quality buildings with a good building manager and body corporate, that will become all the more important.”
