Rising prices shift apartment perceptions

After several months in dormant mode, the housing market is experiencing the traditional Spring pick-up with increases in average asking prices nationwide, according to Trade Me Property.

The website’s August data shows that New Zealand’s average asking price was up to a new record of $597,250, from $591, 100 in July.

This was a rise of $6,000 (1%), which is significant when compared to July’s rise of just $250. It was a 7.1% year-on-year increase.

Head of Trade Me Property Nigel Jeffries said the housing market had warmed up in the three months to August.

“The sluggish property market we’ve seen recently is starting to gain some traction again as we shift into spring.”

The spring resurgence also Auckland’s average asking price rise by $7,000 (0.8%) to a new high of $858,900, as compared to $851,850.

However, Jeffries said this was still a slower rate of growth than previously seen.

“The City of Sails saw figures up over 11% compared to August last year, an annual increase of $88,000.

“It’s well below the record rise that we observed a year ago when it was up an eye-popping $130,000.”

Around the rest of the country, most regions recorded healthy growth in their average asking prices – with only two (Hawkes Bay and the West Coast) seeing a year-on-year fall.

Seven regions showed double-digit year-on-year growth, with Otago (up 20%), Waikato (up 19.2%) and Bay of Plenty (17.4%) leading the way.

But the interesting news is that Auckland’s sky-high prices appear to be helping shift people’s attitudes towards apartment living.

Jeffries said Aucklanders are becoming more comfortable with the idea of swapping a house in the suburbs for an urban apartment.

“We’re seeing first-time buyers face the dilemma of whether to buy an apartment or a small house.

“That’s a challenging prospect when you consider 1-2 bedroom houses had an average asking price of $654,300 in August, while 1-2 bedroom apartments were 14% cheaper at $565,150.”

However, there’s a wider selection of apartments for sale.

Not only does Trade Me Property have more apartments than small houses listed for sale, but there are more with a price tag under $500,000, Jeffries said.

“Interestingly, the premium for a 1-2 bedroom apartment has diminished in recent years. Two years ago the average asking price for a small apartment was almost 50% lower than for a small house.”

The average asking price for an Auckland apartment was $565,150 in August.

Prospective apartment buyers should do their homework and think about the additional legal and financial complexities, Jeffries added.

This is due to the possibility of leasehold ownership, body corporate structure and other associated costs, which can be complex for buyers to get their head around.

“Also, even before the advent of the loan-to- value ratio, banks have generally been reluctant to lend unless buyers have a minimum deposit of 20%.”