Colliers says a surge of apartment building in Auckland next year won't satisfy the longer term demand

Apartment development in Auckland's CBD is likely to fall just short of expected demand over the next few years, according to Colliers International.

Colliers national director of research, Alan McMahon, says 283 new apartments are expected to be completed in Auckland's CBD this year, with another 1142 units next year, 353 in 2017 and 639 in 2018, which would bring 2417 new units to market over the four years from 2015 to 2018, which is an average of 604 new apartments a year.

However he points to Statistics NZ population projections which show the residential population of Auckland's CBD is expected to be 53,000 by 2031, nearly double what it was just two years ago.

McMahon says if there is an average of two people living in each CBD apartment, 11,500 new apartments will be required to house the expected influx of new residents.

That would mean on average, 640 new apartments a year would need to be added to the CBD's existing stock, just to keep pace with demand, he said.

"At first glance the 924 apartment units currently under construction in Auckland's CBD, combined with the 1288 in pre-construction marketing, may appear excessive," McMahon said.

But when you look at what is likely to be required over the next four years, the expected supply doesn't quite keep pace with projected demand, he said.

McMahon says the apartment development market has a built in self correcting mechanism that helps to smooth out imbalances between supply and demand.

A developer will need to get at least 60% of the units in a project pre-sold (off the plans) before their financiers will advance the money, allowing construction to proceed.

"So these developments will only proceed if demand is proven," McMahon said.

"This self correcting market mechanism is frequently seen in action and in the last few months around a dozen developments capable of producing 2000 apartments have been deferred or abandoned." 

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