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High rise boom times

Auckland’s apartment market is booming – yet, despite its generally lower entry point, it continues to be dominated by investors, for good reason.

Friday, May 13th 2016, 10:00AM

by Miriam Bell

Think Auckland’s house price growth is impressive? Take a look at the price growth in the city’s apartment market.

The latest Trade Me Property Price Index shows the average asking price of an Auckland apartment increased by 20.7% year-on-year to hit $560,900 in April.

Further, it shows that, over the past five years, the average asking price of an apartment has gone up by nearly 80% (or $250,000) from $312,550 in April 2011.

Apartment agents usually prefer to assess apartment value per square metre, rather than by asking price, but specialists say that, using this measure, their data also indicates prices are on a steep ascent.

City Sales director of sales Mike Richards said new builds are selling for an average of $10,000 per square metre, with some higher end ones going for close to $15,000 per square metre.

Prices for existing stock are also going up, with an average of $8,000 per square metre common and many hitting $10,000 per square metre.

These prices sit in stark contrast to late 2014 when City Sales figures – excluding new builds or leaseholds - show the price of Auckland apartments came in at around $6,000 per square metre.

Traditionally, the lower prices and high returns on offer meant the apartment market was favoured by investors.

But now the rising cost of apartments means yields have dropped while capital gains have increased – and yet investors continue to dominate the market.

Richards said that investors still make up about 70 to 80% of the sales they are involved in, which surprises him.

“Apartment prices may have gone up, but they still tend to provide a much lower entry point into the property market than houses do.

“There may be a bit of a trend towards more owner-occupiers getting into the market, but many such buyers remain a little wary, despite the cost advantages and urban lifestyle attractions.”

Other apartment experts are not as convinced.

Apartment Specialists director Andrew Murray thinks there are noticeably more owner-occupiers entering the apartment market now.

This trend will only grow as buyers, particularly first home buyers and newbie investors, realise that apartments are a far more viable cost-option for them, he said.

“Recent articles indicating some apartments are cheaper to buy than to rent may be true now – thanks to record low interest rates. Once rates rise, the situation is likely to change.

“However, property buyers are still going to have their money going towards something they own, rather than something belonging to someone else.”

While the apartment market is changing, it still has a lot to offer investors, Murray said.

“Not only are there more price opportunities, but the arrival of Air B ‘n’ B is really blowing returns open up again, particularly in the CBD.

“Renting out your apartments via Air B ‘n’ B can mean high profits and good occupancy rates. It can really boost an investor’s returns compared to what they can expect renting in the traditional way.”

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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 3.95 4.49
ANZ Special - 3.55 3.45 3.99
ASB Bank 5.20 4.05 3.95 4.39
ASB Bank Special - 3.55 3.45 3.89
BNZ - Classic - 3.55 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 4.30 4.20 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.55 3.45 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - ▼3.55 3.39 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.55 3.45 3.99
Median 5.34 4.04 4.09 4.39

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