New Auckland apartments are costing more than stand alone houses as baby boomers drive demand for higher quality developments

Next year could be the time for people thinking of buying an apartment in Auckland to make their move, according to a report on the city's apartment market by Colliers International.

The report says around 6000 new apartments are likely to be completed in Auckland over the next four years, with almost half of them expected to be completed by the end of next year, significantly increasing the choice available to potential buyers.

However that choice may not last long because the number of apartments expected to be completed starts to drop off quite significantly from 2017, suggesting people thinking of buying into the market should act if they find something that suits them, because that range of choices may not be available to them later on.

In a Double Shot interview with interest.co.nz, Colliers national director of research and consultancy Alan McMahon said developers were typically selling down 50% to 60% of new apartment projects off the plan, and could often charge a higher price for the remaining units once construction was completed.

"So if you want to be sure you can get one, or get one at the best price, it might pay to get one quite soon," he said.

However the apartments coming on stream were not cheap and would likely be beyond the means of most first home buyers. 

McMahon said most of them were being purchased by baby boomers who were selling their existing family home and making the move into apartment living.

They wanted a high quality product in a good location and the prices they were prepared to pay reflected that.

Most apartment were being sold for $8,000 to $10,000 per square metre, compared to new stand alone homes which typically sold for $5500 to $7000 per square metre.

"There's more acceptance of apartments from people generally, particularly from people in their 50s and 60s," McMahon said.

"They are the typical buying cohort of these better quality apartments and they want a pretty decent space."

The report said 6054 new apartments in 75 buildings were expected to be completed in Auckland by the end of 2018, providing an average of 81 apartments per building.

That would take the total stock of apartments in the city to 30,710, and 20,108 (66%) of those would be in the CBD, 5897 (19%) would be in CBD fringe areas and 4705 (15%) would be out in the suburbs.

Prices of new apartments typically started at around $319,000 which was the average price of  a 30 square metre studio, although the report noted that only 7% of new apartments coming to market were studios.

The typical size of new stock coming to market was 45-60 square metres for one bedroom units, 70-90 square metres for two bedroom units and 90-120 square metes for three bedroom units.

And although rental yields were low, investors were prepared to buy them in the expectation of making a capital gain.

The report said residential rental yields in Auckland were averaging around 3.1%, compared to typical yields of 6% to 8% on commercial properties.

"While capital growth remains strong, and the ability of renters to pay higher rents is limited, landlords will tend to continue to match borrowings with net rent," the report said.

"They will target a cashflow neutral position, keep their tenants happy and the rent flowing and wait for a windfall capital gain on sale."

You can read Colliers' full report on the Auckland apartment market by clicking on the following link: