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Time to invest in Auckland Central

High prices and population growth have characterised the Auckland Central suburbs in recent years, but with new transport links and developments on the horizon, opportunities are out there for lateral thinkers.

Friday, March 3rd 2017, 9:00AM

by Carolyn Cossey

Wynyard Quarter is a mecca for central city apartment living

Has there been a hotter topic in recent years than the continued rise and rise of Auckland house prices?

The central Auckland suburbs have been the best fodder for sensational headlines: How much for a derelict do-up in Ponsonby? We finished last year with Barfoot and Thompson statistics showing the average house price in Central Auckland sat at $1,075,000.

A big driver for high prices has been population growth. As Aucklanders sit in grid-locked traffic, we contemplate how to somehow fit another 700,000 residents in over the next 30 years.

The City Rail Link (CRL) is central Auckland’s most significant infrastructure project, designed to make public transport a viable option. It has an estimated cost of up to $3.4 billion, and will take five and a half years to complete. Essentially, it is twin 3.4 kilometre tunnels, which will turn Britomart Station from a dead end to part of a circuit.

Some central Auckland suburbs are set to benefit more than others. City Rail Link communications manager Carol Greensmith explains, “It means access to more of the city with stations in midtown and Karangahape Road. Everyone gets off at Britomart now because they have to, but we believe the midtown station [Aotea] will be the largest in New Zealand, and we’re building it for a 30,000 commuter throughput per day.’

Hamish Firth is the director of Mt Hobson Group, a resource management consultancy. ‘It will make a big difference to those in Kingsland, Mt. Eden, and Grafton.” Currently, western line users at those stations have to go all the way to Newmarket, then backwards to Britomart. The CRL will take them to K’ Road and midtown first, saving between fifteen and thirty minutes.

King of the City

The NXN development in Kingsland - the first major development in Kingsland in a decade – is positioning itself to take advantage of the increased accessibility. It consists of 78 north-facing dwellings with direct access to Nixon Park.

Developer Matt Wickham says, “The complex is in the unique situation of being between a park and a train station. The station has been an under-rated asset to Kingsland, but is about to be more highly valued.

"Kingsland has a great vibe, you’ve got Portland House with its live music, and plenty of other bars and restaurants. We have bench-marked our prices against similar properties in suburbs such as Grey Lynn, and we are significantly lower than those over the Great North Road Ridge, but you are only five minutes away.”

While NXN is a premier development - Firth sees options for investors in Kingsland. “You can pay a premium of up to $100,000 for a north-facing apartment. Sites that are slightly secondary, with a south-west aspect, are a good option for investors.”

Karangahape Road, with a new train station coming, is ripe for development. Krister Samuel, apartment expert and sales consultant for Ray White City Apartments says, ‘There’s been investment from some of Auckland’s top commercial developers, but it hasn’t lost its vibrant edge. It’s like Ponsonby fifteen years ago. Just last Thursday at our weekly auction, we sold a three-bedroom, two-bathroom apartment with a car park, just off the K-Road ridge, for $550,000. That’s extraordinary value.”

Opportunities in Onehunga

Onehunga is a suburb that is set to benefit from several infrastructure initiatives. Located on the Manukau Harbour, it is just 10 kilometres from the Auckland CBD, and has easy access via State Highway 20 to the airport. Panuku Development Auckland, a council controlled organisation, has identified it as a key area for investment.

It’s had a $30 million reconstruction of the foreshore, with cycle and walkway facilities. The Onehunga Mall has had a $1.2 million upgrade. While Onehunga is currently on the train line, it is a terminating station. The City Rail Link will mean that the Onehunga train will run to Britomart, through the CRL and become the Western Line.

Lamont & Co is the developer of a new pocket neighbourhood, Fabric of Onehunga. Director Andrew Lamont says, “Onehunga is one of Auckland’s oldest suburbs, and one of the most loved, with a loyal community. It’s not just improvements to the train that will help access, the Waterview Tunnel should reduce drive time into the city to about 20 minutes.”

A pocket neighbourhood is defined as a series of buildings based around common grounds. Fabric will have 239 new apartments across five buildings, surrounded by landscaped grounds, on a 1.29ha site. Lamont says, ‘It’s pretty rare to be able to plan a development with such extensive grounds, on the doorstep of an existing town centre. It’s hard to replicate that, and it has a very different feel from a development on the edge of the city with a new town centre.

"We are selling to down-sizers, Kiwisaver first home buyers, and investors. About half the stock are two-bedroom, two-bathroom apartments of around 76 square metres, with an external courtyard or deck, a car park and a storage locker. Those are selling for between $700,000 to $900,000, with a rental assessment of $580-$640 per week.

Thinking laterally

With high purchase costs in Central Auckland, non-traditional tenancies can maximise yields. David Graham at Quinovic Viaduct specialises in serviced apartments, with a minimum rental period of seven days.

“We offer a fully inclusive product as an alternative to hotel accommodation. For a set price per week, the guest gets unlimited internet, Netflix, Sky TV, luxury linens, a cleaning service, and access to a car park. We then do something called ‘flip-flopping’. Through summer, there is a strong market for short-term accommodation, but in the winter, we put the apartments into long-term tenancies.

"At the lower end of the market, a one-bedroom with a car park might rent for $550 per week, in summer, we can rent that for $1120. At the top end, a premium one bedroom on the waterfront with views, and a car park, we can rent for $1750 per week through summer, and bring it down to $800 during the winter.”

“There is a lot of apartment stock in Auckland that is now 15 to 16 years old, which has become tired, and is under-rented,” says Graham. “There are apartments in the Metropolis building, for example, which can be picked up in the mid 300-thousands.”

Krister Samuel has a similar example. “Just last night I was showing a young couple, with decent equity in their own home, a studio unit with car park, for under $200,000, returning $16,000 per annum in gross income.”

“This apartment is in Newmarket, just off-Broadway, in the double-grammar zone. The way those numbers stack up, they can borrow the whole amount, leveraging off their existing equity, and have it paid off in 10 to 15 years, without any contribution of their own. There’s no land-lording involved, the unit is in a hotel pool, so that gross return is guaranteed.”

Unitary Plan Opportunities

What about investors who think they may be already sitting on a gold-mine, with properties in their portfolio able to be intensified due to the Proposed Auckland Unitary Plan? Hamish Firth doesn’t see this as an immediate road to easy gains.

‘‘The Unitary Plan has up-zoned 80% of Auckland; where development was prevented, it is now a given everywhere. Some people have sites where they can now put five, ten, 20 or 30 houses. I’m not sure that the council is ready for the tsunami of consents it has coming.’

President of Auckland Property Investors’ Association Andrew Bruce cautions, “Some people were up-zoned, giving them an equity upswing, which is very fortunate. However, most people have no idea how difficult subdivision is. You need a particular skill-set, such as a background in town planning, or surveying, or be prepared to pay for that advice.”

Vendor expectations changing

So, after years of rising prices, are we at the top of the cycle?

“No one really knows!” says Bruce. “I’m not active in the market right now, as I feel my portfolio is established, and I don’t think it’s the time to be leveraged to the eyeballs. I’m reasonably conservative though. However, if I was looking, there are more opportunities now than there were even a month ago. It’s not just the LVR rules that are slowing buyers down, that is missing the point, banks were already tightening up, particularly on serviceability.”

Lucia Xiao began investing in 2012, and is a strong advocate of central Auckland. She runs a mortgage broking business called FINAX, as well as providing property investment advice, and working on her investment property portfolio. She is in a position to capitalise on current opportunities.

“I have just bought two houses in one week, both with 20% off their market price. With the first one, the vendor was happy to get a quick sale at auction, so she could bid on a house she wanted to buy later that day. It was a win-win.”

Lucia isn’t particularly concerned with specific suburbs within central Auckland, but focuses on houses with vendors open to negotiation. “The second house in Gillies Ave, Epsom, is in the double-grammar zone, with an off-shore vendor. Most importantly, it was a big two-bedroom, with the opportunity to convert it to a four-bedroom.” The vendor’s expectation was $1.2 million, and Lucia bought it for just one million at auction.

Krister Samuel is seeing the change. “Genuine sellers are ready to listen to the market. The LVR rules have caused a shock to buyer confidence. It’s a brilliant time to invest, if you have the courage to go against the tide, you can get a bargain.’

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Lender Flt 1yr 2yr 3yr
AIA 4.55 3.19 3.19 3.49
AIA Special - 2.69 2.69 2.99
ANZ 4.44 3.15 3.25 ▼3.39
ANZ Special - ▼2.55 ▼2.69 ▼2.79
ASB Bank 4.45 3.19 3.19 3.49
ASB Bank Special - 2.69 2.69 2.99
Bluestone 4.44 4.44 4.44 4.44
BNZ - Classic - 2.65 2.69 2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.25 3.29 3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union South 5.65 4.75 4.75 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 2.60 2.65 2.80
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 3.99 2.58 2.68 2.79
Kainga Ora 4.43 3.29 3.39 3.85
Kiwibank 3.40 3.40 3.54 4.00
Kiwibank - Capped - - - -
Kiwibank - Offset - - - -
Kiwibank Special 3.40 2.65 2.79 3.25
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.49 3.45 3.39 3.69
SBS Bank 4.54 3.29 3.19 3.49
SBS Bank Special - 2.79 2.69 2.99
The Co-operative Bank - Owner Occ 4.40 ▼2.69 ▼2.75 ▼2.99
The Co-operative Bank - Standard 4.40 ▼3.19 ▼3.25 ▼3.49
TSB Bank 5.34 ▼3.35 3.49 3.79
TSB Special 4.54 ▼2.55 2.69 2.99
Wairarapa Building Society 4.99 3.75 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.55 2.69 2.79
Median 4.55 3.19 3.22 3.39

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