The apartment boom
And the impact on house prices
Auckland City’s skyline is undergoing a rapid transformation as a record number of apartments rise from dusty holes in the ground and cranes work overtime — a building boom which has also been blamed for a drop in central Auckland median house prices.
More than 5500 city apartments are due for completion in the next two years — and there are more still rising in the suburbs.
Real Estate Institute (REINZ) figures for October show a staggering
17 per cent drop in median prices within the central Auckland City suburbs — from $1.025 million to $850,000 since October 2016.
REINZ chief executive Bindi Norwell said the fall was “predominantly” the result of the large number of apartments in the area.
But Pete Evans, national director of residential project marketing from Colliers Real Estate, predicted the impact would be short lived.
The record number of apartments under construction and nearing completion was expected to drop markedly in 2020 and 2021.
Despite the current apartment boom, Evans and other property experts say thousands more are needed to help fill the rapidly growing housing shortage in Auckland.
More than 80 per cent of apartments due for completion in
2018 and 2019 are pre-sold so will not enter the pool of housing stock.
That, coupled with rising building and consent costs, mean there will still be a large shortage in the future, say industry experts.
New data from Colliers Real Estate estimate 2406 apartments will be completed in Auckland city and the city fringe in 2018 and close to 3000 will be completed in 2019.
There are also 4018 apartments due for completion in the greater Auckland area — outside the CBD — in the next three years.
The apartments range in price from $575,000 for a one-bedroom inner city apartment to more than $2m for high-end city fringe apartments.
Evans said despite the record number of apartments due for completion most had sold off the plans years ago.
“These numbers, even though they are record numbers, are in no way close enough to meet the current demand,” Evans said.
“The apartment undersupply plus
the shortage of new terrace and standalone houses means as at the end of 2017 there is a shortage of
40,000 new dwellings in New Zealand.”
Evans said if the current population growth of 40,000 each year was maintained there would be a need for
15,000 to 18,000 new houses and individual dwellings per year.
Current building consents are for around 10,000 houses and individual apartments each year but a lot fewer are being built.
Evans predicted there would be a slowdown in construction — similar to what was seen in the years following the Global Financial Crisis in 2008.
“The market has been good for the last few years but what we are seeing is that the numbers will not be sustained . . . because of build costs and funding for developers,” he said.
Evans said the years 2020 and 2021 won’t bring the supply needed to meet demand.
David Nagel, at property valuation company qv.co.nz, said the delay between the marketing of and the construction of apartments meant demand was still high.
“The construction time required for these developments, including time to get consent approval and building inspections, means that although developers have reacted to the demand, it will be some time still before the demand for this type of accommodation is met.
“The problem is that there is such a high demand for housing that we are unsure if the new apartments coming on to the market will have any effect whatsoever,” he said. “Probably not.”
Well known developer Ockham Residential has five large developments under construction and said demand continued to grow.
The company’s developments sold out before construction started, spokeswoman Maria Salmon said.
“People are really enjoying living in well-built developments but at an affordable price point.”