Recent reports of developers substantially increasing the original costs - and deposit requirements – of apartments under development are enough to strike fear into an investor’s heart.
But according to the New Zealand Property Council the Auckland developments where this has occurred are the exception rather than the rule.
Property Council chief executive Connal Townsend said that experienced developers are working hard to keep up with demand and deliver quality developments on time and to budget.
CBRE data shows that Auckland has 8,500 apartments in the active development pipeline, he said.
This includes apartment developments that are under construction as well as those that are being actively marketed but are not yet under construction.
Further, over 2,500 apartments have been completed since the start of the current development cycle in 2013.
Townsend said that, given this scale, the industry is coping well – but buyers should have confidence in buying apartments off-the-plan.
“The recent examples of a small number of projects seeking to increase prices prior to the sale and purchase agreements going unconditional is the exception rather than the rule.
“They are an example of developers who do not follow best practice. But many well-funded, experienced developers are delivering in this market without price increases.”
Buyers should have certainty in a developer’s ability to see through a project with the funds paid up front, he said.
“To this end, buyers should buy from developers who have a proven track record or work with an experienced project team.
“Buyers should look for a developer that has already successfully delivered off the plan apartment builds.”
Apartments are an important part of residential living in a city like Auckland which is experiencing a serious housing shortage, Townsend added.
His advice comes shortly after the Property Council’s recent Residential Summit which examined the challenges facing the residential development industry.
These challenges include rising construction costs, labour shortages, the need to supply quality housing quickly given the housing shortage, and tepid policy changes which are not delivering the desired outcomes.
Townsend said the situation is one which involves not just developers, but banks, councils and builders.
The Summit was a step towards assessing the challenges and working together as an industry to come up with a solution that delivers affordable and sustainable housing, he said.
“A crucial part of addressing many of the issues relies on our own innovation and ingenuity.
“We firmly believe that through innovation we can deliver quality housing that reflects the growing demand and changing demographic patterns of our cities.”
At the Summit, the Property Council launched a new Residential Manifesto which outlines a road map and vision for residential property development in New Zealand.
It suggests challenging conventional practices; adopting smarter regulations and an incentive based approach; better enabling construction capability and capacity; and improving infrastructure provision and funding.
It also emphasises that co-ordination among central government, councils and the private sector is vital.
*As can be read here, landlords.co.nz has previously reported on the need for apartment investors to do their homework.
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