Apartment attraction on the rise
Thursday 6 April 2017
Growing recognition of the dire need for apartments to house Auckland’s booming population means the city’s apartment market now looks very different to that of 20 years ago.
By Miriam Bell
With higher density developments under construction in areas across the Super City – from the North Shore to South Auckland – it’s easy to forget that apartments used to be a small sub-set of dwellings confined to the central city.
Back in 1997, there were eight apartment buildings which were home to around 400 residents in the whole of Auckland.
Today, the Super City has 503 apartment buildings which contain 31,500 separate dwellings – and many more are under consent or construction.
Meanwhile, Auckland’s central city itself has become an increasingly popular place to live.
According to new data from Auckland Council, the number of people who live in the central city is expected to reach 45,000 this year, 15 years earlier than expected.
The city centre population is then forecast to grow by a further 30,000 over the next 10 years.
Most of this population lives, and will live in, apartments.
Veteran apartment agent Martin Dunn founded Auckland’s first specialist apartment agency, City Sales, in 1997 as he realised the potential in the nascent apartment scene.
At the time, few shared his belief that Aucklanders would take to inner city apartment living, especially given the traditional Kiwi preference for a house with a backyard.
Now, as his agency celebrates its 20th anniversary, Dunn feels vindicated in the optimistic outlook he has always had for the apartment market.
We have now entered into a renaissance of inner city apartments, much like that which occurred with former workman’s cottages in Ponsonby and Freemans Bay in the 1970s, he said.
“Auckland is undergoing a normalisation of apartment living that has been long delayed.
“It happened earlier in Sydney and Melbourne, but it is only now that Kiwi attitudes to apartments are really changing.”
The arrival of high end apartment complexes aimed at owner-occupiers, combined with recognition that apartments are a more affordable option than houses, has led to a big change in perceptions towards them.
Dunn said apartment living is increasingly being seen as glamorous and sought after.
“People can sell up a very ordinary house in the suburbs and then, with the proceeds, easily secure a high spec, ultra-secure, stylish apartment right in the midst of areas offering multiple lifestyle and entertainment options.”
This has contributed to significant price growth and capital gain in the apartment market.
Traditionally, investors have been attracted towards apartments because of their lower prices and their potential for better yields.
But Dunn said that, despite recent price increases, apartments are still a far less expensive option than houses for many investors.
“An investor can still buy an apartment for under $500,000 and can then see around 5.5% net return on that.”
The Auckland Council’s adoption of the Unitary Plan, along with a widespread acceptance of the fact that Auckland desperately needs many more affordable dwellings to be build, means the future looks bright for the apartment market.
But there are still some clouds on the market’s horizon.
Several high profile apartment developments failed late last year, which dented buyer confidence; banks have tightened up on their funding to developers; and there are concerns about construction industry capacity.
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