Suburban owner-occupier apartments are becoming an increasingly significant component of Auckland’s apartment market, CBRE research shows.
Investors have always formed part of the suburban sector – well over half the market until early 2015, as the research paper shows. But, as investment apartment numbers stuck at around 1200, the owner-occupier share has steadily grown every quarter since mid-2015.
In the paper released on Monday, CBRE Research senior director Zoltan Moricz & senior analyst Tamba Carleton said steady growth in development of suburban owner-occupier apartments over the last 18 months meant they now accounted for a quarter of the current pipeline and, should all projects proceed to completion, suburban owner-occupier stock would double by the end of 2019.
“Although this boom in supply is well above long-term averages, the majority of the pipeline is presold. And, while there are a range of complex issues constraining the market, there is sizeable growth potential for suburban owner-occupier apartment development in the near future.”
CBRE’s researchers counted 2280 suburban owner-occupier units built between 1995 and the first part of 2017. The pipeline is nearly as big as the volume constructed over the last 20 years, with 2190 units planned to be completed between now and the end of 2019.
“This level of growth is unprecedented in Auckland’s history, and is reflective of a structural shift in housing composition & societal attitudes toward density. Early adopter buy-in has been highly localised, with a high proportion of presale buyers either living in or at least familiar with the area.
“There has been limited buyer resistance, with comparatively few of the 20 suburban project abandonments driven by a lack of buyers. However, in some locations community resistance has shaped the surrounding pipeline or in extreme cases reduced it completely.”
Mr Moricz & Ms Carleton said the buyer stereotype was a downsizing baby-boomer couple, but the reality was “a much more diverse demographic of off-the-plan buyers who make a purchasing decision based on a combination of lifestyle & economic factors. Decisions are based on individual values & beliefs, however there tends to be sufficient buyer interest in projects that are well located, well designed and affordable relative to house prices in the immediate area.”
The researchers highlighted a major challenge facing the market as residential price growth slows – the high cost of development, mostly due to construction costs: “This has a flow-on effect to retail prices, reducing the economic attractiveness of new apartments relative to other types of dwellings and resulting a different outcome when purchasing decisions are made.
“The combination of high development costs with slowing house price growth has contributed to reduced feasibility of mid- to highrise apartments in many suburban locations. This has shifted the focus of the pipeline from purely high density toward variations of the ‘missing middle housing’, including walk-up dwelling typologies & semi-terraced apartments.
“These lower density typologies will appeal to owner-occupiers if they are well located, well designed and affordable relative to house prices in the immediate area and, with the unitary plan allowing more of this development than ever before, the suburban owner-occupier pipeline has significant growth potential moving forward.”
Attribution: CBRE report.