Apartment market still dominated by investors

A Colliers International analysis of buyers in the Alexandra Park development shows that, to date, 82% are owner-occupiers and just 18% are investors.

It also shows that 79% of buyers were 45 years of age or older – and 37% were older than 60. Just 21% of buyers were under 44 years old.

Pete Evans, who is Colliers International’s national director of residential property marketing, said the Auckland apartment market has come of age with baby-boomers increasingly attracted to apartments.

“I think a lot of people still presume those buying apartments are investors wanting to put the likes of students in them or young people who can’t afford their own standalone house.

“These numbers blow those out-of-date perceptions out of the water.”

Until recently, many thought apartments were the domain of the young, were too small and not a good option for the average middle-class middle-aged Aucklander, Evans said.

“Twenty years on and it’s the baby-boomers who are the largest growth market.”

However, these claims have been disputed by one of Auckland’s apartment experts.

Apartment Specialists’ Andrew Murray said the Colliers data might be correct when it came to new high-end apartment developments on the fringes of the central city.

But he said it was incorrect when applied to the Auckland apartment market overall.

“Baby-boomers are attracted to the high-end apartment developments springing up in places like Mt Eden, Grey Lynn and Greenlane. For many, it means they can downsize but still move to another property in the community they are established in.

“They can afford to do it. But those new developments are well out of the price range of most first home buyers, while for investors they don’t offer the returns they are looking for.”

Looking at the apartment market across the board about 70% of stock being sold is still going to investors, Murray said.

“Most of the new apartment developments, particularly in the CBD, are still not high-end enough for baby-boomers. They sell to investors and also overseas buyers.”

The fact that established apartment investors are doing well out of the current property boom probably adds to their attractiveness to other investors.

Murray said the increase in apartment prices means that those who bought apartments years ago, when no-one else wanted them, are now seeing a net return of about 14%.

“With that sort of return, why would you get out of the apartment market? Where else can you get that sort of return?"

It’s all about cash flow and income for the older investors with smaller apartments, Murray said.

"Meanwhile, younger investors are buying the larger apartments which offer superious return figures with the proposition of selling to emotional first home buyers in the future.

"It's the holy grail of an investor if you will..... capital gain and return."