Apartment market bucks the trend
Miriam Bell finds out how the apartment sector is holding up during this market downturn.
There is no end in sight to the housing market downturn, but the wheels have not fallen off the apartment sector in markets around the country.
Last week a small, investorstyle Auckland city centre studio apartment went up for auction. It was freehold and had a car park, but remedial issues were discovered 24 hours before the auction.
City Sales sales manager Scott Dunn says they ran a 24-hour campaign to ensure full disclosure, and to find buyers who would buy a potentially problematic property, unconditionally with cash.
On auction day, the apartment attracted 85 bids before being sold under the hammer for $220,000, which is close to what its value would be if there were no remediation problems.
It was bought by an investor, and Dunn says the sale shows there are still apartment buyers out there, despite the tough market.
The Auckland city centre apartment market, which makes up more than half of Auckland’s apartment market and is the biggest in the country, was hit hard by Covid-19, and the departure of students and migrant workers.
While residential property prices in other markets rose steeply, in the Auckland city centre they did not.
For example, Trade Me Property figures show average asking prices nationwide increased by 25.2% in the year to December 2021, with apartment prices up 7.2%.
Within that, apartment prices in the Auckland region were up 4.1%, while the Wellington region and Christchurch’s were up 18.4% and 7.4%.
But Trade Me’s latest asking price figures suggest the apartment sector is weathering the downturn relatively well. While the average national asking price was down 6.1% in the year to December 2022, apartment prices nationally were down 0.7% to an average of $748,050.
In Christchurch and Wellington, apartment prices were up 5.5% and 2.5% to averages of $615,250 and $725,300 respectively, although in
Auckland they fell 2.3% to an average of $744,800.
Dunn says Auckland’s apartment market has been quiet over the DecemberJanuary period, but that is not uncommon as, traditionally, its busy season is February to April.
That upcoming three-month period is looking busy as many city centre apartment sellers are bracing for a mid-year recession, and want to put their property on the market before the recession hits, he says.
‘‘Properties without associated mortgages, such as the apartment with remedial issues, are selling well, and there is activity in that space.
‘‘But the type of two-bedroom properties that appeal to firsthome buyers and young professionals are not doing as well. That is not because of prices, it is because of the rise in interest rates and borrowing costs.’’
Once interest rates look as though they have peaked, there will be a rush of confidence, and more buyers will return to the apartment market, Dunn says.
Apartment Specialists director Andrew Murray says there is a lot of stimuli coming for Auckland’s city centre this year, and it means the central apartment market is likely to be at its bottom now.
Around 40,000 students will be back on campus this year, and with the borders open, international students, migrant workers and tourism are returning to the city, as are office workers, he says.
‘‘It won’t impact on prices in the market right away, but demand for accommodation and rentals is climbing.
‘‘At the start of last year there were 1200 apartments available for rent, but in January this year there were 525.
‘‘That is a big decline in CBD rental stock, and with more students, migrants and tourists to come, it will put the pressure on. Rents will
‘‘The type of two-bedroom properties that appeal to first-home buyers and young professionals are not doing as well. That is not because of prices, it is because of the rise in interest rates and borrowing costs.’’ Scott Dunn City Sales sales manager
go up, and investors will get more interested.’’
The seeds of the recovery are there, but borrowing costs are holding buyers back, and that means there are opportunities there for people who are in a position to buy, he says.
‘‘In contrast, at the higher end of the Auckland apartment market, there is still strong demand there, but there is not enough stock for sale.’’
Around the rest of the country, apartment markets are quieter than they were at the height of the market boom, but activity is steady.
‘‘At the higher end of the Auckland apartment market, there is still strong demand there, but there is not enough stock for sale.’’ Andrew Murray Apartment Specialists director
‘‘The problem for Wellington’s market is there is a pretty slim pipeline of apartment developments, so when demand eventually increases, it will be interesting.’’ Nicki Cruickshank Tommy’s Real Estate principal
In Wellington, apartments are selling as well as houses are, although there are usually fewer apartment buyers as families are not in the mix for them, Tommy’s Real Estate principal Nicki Cruickshank says.
‘‘Sales might take longer, but apartment sales are ticking over. It is the same, old story: if properties are priced competitively and presented well, they are going OK.’’
Apartments are a cheaper option for people wanting to get into the market, although her agency recently sold a onebedroom property for more than $600,000, which surprised her, she says.
‘‘But many decent apartments are now in the $450,000 range, and that is attractive to many buyers.
‘‘The problem for Wellington’s market is there is a pretty slim pipeline of apartment developments, so when demand eventually increases, it will be interesting.’’
There has been some softening in Christchurch’s market generally, but the wheels have certainly not fallen off the apartment sector, First Avenue Property’s Treacy Ireland says.
‘‘We are seeing good attendance at open homes, there’s a range of buyers in the market, and we are still doing good deals. Anything that has a car park is gold.’’
Christchurch apartment development has been strong in recent years, and there is more in the pipeline, but some may end up being converted to Airbnbs, she says.