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Who loves apartments the most

New Zealanders may have finally started to embrace apartments as homes but it is investors who buy them the most, according to new analysis from CoreLogic.

Thursday, December 12th 2019, 10:28AM

by The Landlord

Using their Buyer Classification data, the property research company has taken a look at which buyer groups have been buying both “new”* and “old”, or existing, apartments in Auckland.

It turns out that investors lead the pack in both categories.

The data shows that the largest buyer group for new apartments in 2019 is mortgaged investors. They had market share of 34%, up from 29% in 2018.

When it came old apartments the buyer group with the biggest market share was cash investors with 29%.

That share is lower than 31% in 2018, but the share of purchases going to mortgaged investors was up (from 22% in 2018 to 25% in 2019).

In contrast, first homes buyers had a 20% share of the new apartment market and 14% in the old apartment market.

CoreLogic Senior Property Economist Kelvin Davidson says that a key insight to take from this data is that it is further confirmation of the rising presence of mortgaged investors in the property market.

The reasons for this rise include the low returns on other assets (e.g. term deposits) and the boost to confidence (and profits) that was provided by the scrapping of capital gains tax proposals.

But Davidson says another factor has been rising rents and, now, the start of an upturn for yields as well.

“In terms of yields by property type, the appeal of apartments is pretty clear to see: for properties recently on the rental market in Auckland (not split by new or old), gross yields are already starting at a much higher level for one-bedroom apartments than three-bedroom houses.

“In Parnell, for example, the gross yields for one-bedroom apartments (5.1%) recently rented out are easily more than double the figure for three-bedroom houses (2.2%).”

Anecdotally, they hear quite a lot that yields on new-build apartments (and houses) are also higher than older properties, while new-builds are also exempt from the LVR lending speed limits, Davidson says.

“Alongside better (and rising) yields, there is another strong reason why some mortgaged investors will have found Auckland apartments to be a good buy lately.

“That is they may well have been finding sellers wanting to get a fast sale and managed to pick up some ‘bargains’.

“In Auckland City, the proportion of apartment resales made below the original purchase price has risen steadily over the past 2-3 years. No doubt some of these ‘loss-makers’ will have been snapped up by canny mortgaged investors.”

* New apartments are defined as those where the building age is in the same year as transfer/purchase. The rest are ‘old’, or existing properties.

Read more:

Revisiting apartments 

SuperCity changes enabled by Unitary Plan

Tags: Apartments Auckland capital gains tax CoreLogic housing market investment property investment real estate rental returns rents yield

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ANZ Special - 3.45 3.65 3.99
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ASB Bank Special - 3.39 3.55 3.89
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Heartland Bank - Online - - - -
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HSBC Premier 5.24 3.54 3.20 3.69
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HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 3.97 4.05 4.39
Kiwibank 5.15 4.20 4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.45 3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
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Pepper Money Near Prime 5.64 - 5.44 5.44
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Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.45 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.39 3.55 3.89
Sovereign 5.30 3.89 4.05 4.39
Sovereign Special - 3.39 3.55 3.89
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
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TSB Bank 6.09 4.19 4.35 4.69
TSB Special 5.29 3.39 3.55 3.89
Wairarapa Building Society 5.50 3.95 4.05 -
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