Troubled apartments ‘flying off the shelf’ as cash buyers hit the cheap end of town

Auckland CBD’s apartment market is having a resurgence, with auction clearance rates on the rise and buyers on the hunt for bargains.

City Sales manager Scott Dunn says owners who are selling their apartments while the market has hit rock bottom are serious and realistic.

“So if they are given the right opportunity, most of them are grabbing that with both hands.”

It comes as buyers have also returned to the auction room and are creating competition for some of the apartments, especially those at the lower price range, he says.

“Right now that freehold, two bedrooms with a car park is very hard to sell because it needs a mortgage and the mortgage is very expensive. But the leaseholds and the remedials, which are usually so hard to sell because they are so complicated, they are flying off the shelf at the moment because people buy them with cash.”

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City Sales’ last two auctions, which usually have about six and eight apartments, had a 100% clearance rate and the two months prior it sat around 80%.

Last week three buyers fought over an apartment on Day Street that was announced on the market at $220,000, but didn’t sell until it hit $252,0000. An apartment in the troubled Victopia apartment block on Victoria Street West also drew a lot of attention and sold for $141,000 – $50,000 more than expected.

While there has been competitive bidding, Dunn has not seen any auctions from his agency or any others where the prices had gone crazy or way above expectations.

The lower prices are also making the yields attractive to investors, especially as rental demand, buoyed by migrants entering the country, also increases.

“The yields are good at the moment because the rental market is very strong, but sale prices are still moderate.”

Some freehold properties are getting yields above 8%, he says, which would have been impossible a couple of years ago.

A small studio on Howe Street in Freemans Bay is being marketed at high-yield investors. Photo / Supplied

City Sales is selling a freehold 21sqm one-bedroom, one-bathroom on Howe Street, in Freemans Bay, priced by negotiations that would suit a high-yield investor.

Ray White City Realty Group auction manager Cameron Brain says going from having only one bidder to having three or four people competing for an apartment doesn’t seem to have resulted in any big price change.

But it has helped sell apartments and ones that failed to sell at auction earlier in the year are now “all of a sudden” sold, he says, as their auction clearance rates hover around 70% to 80%.

“We’ve seen a lot of investors, a lot of speculators, traders come back into the marketplace. There’s certainly demand there for it.”

Investors are looking at leasehold apartments not necessarily for the capital gains, but for the returns they offer. The demand for apartments to rent has also increased with reports of queues of people turning up to viewings, he adds.

It also appears to be pushing rental prices up with the average weekly rent for a one-bedroom apartment now $460, up 10% year-on-year, and a two-bedroom $590, up 5% year-on-year, according to Valocity data. In contrast, Auckland apartment values slid 1.2% quarter-on-quarter.

Valocity senior research analyst Wayne Shum says the rise in net migration throughout 2023 has lifted tenant demand and is providing better yields for existing owners.

Barfoot & Thompson salesperson Jill Jackson says it’s not just cheap apartments that are getting attention, but exceptionally good ones such as those that are well presented, have unique characteristics, or good views.

“These special properties attract good interest, good numbers through the open homes and multiple bidders.”

An Anzac Avenue penthouse sold for $1.485m in May. Photo / Supplied

Jackson sold a New York-style two-bedroom, two-bathroom penthouse in the Maisons En Ville building on Anzac Avenue for $1.485m in May, which was $365,000 over CV. Ninety-five groups viewed the apartment and many hadn’t even been actively looking for one. The apartment’s high ceilings, open spaces and period features, such as casement windows, were big drawcards.

She is selling another two-bedroom penthouse-level apartment on Anzac Avenue, which has a combined RV of $680,000 for the apartment and a car park, that she thinks will attract buyers due to it being another mid-century-converted commercial building.

The property is marketed as “$1m views for less” with Jackson adding it will be more affordable than the other Anzac Ave apartment.

“I’m expecting a good reaction – it’s got all of those things that set it apart like the high ceiling, lovely views and obviously the location is very good, close to the Waiheke ferry and the Spark Arena and those things.

“It’s just going to be an interesting one to see how this turns out, who is there, and how they bid.”

Jackson says freehold apartments that are about 50sqm with a car park are desirable because they are easier to get finance and find tenants for.

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