Published 13 November 2005
Auckland’s apartment market is likely to continue to perform well overall, despite recent comments to the contrary from market observers, says Edward Bell of Jones Lang LaSalle’s valuation department.
“Recent negative commentary surrounding the Auckland apartment market has focused on the performance of poor-quality one-bedroom & studio units, which tend to attract student occupiers. The problem is, there has been very little distinction to date between the performance of this stock and the balance of the market,” said Mr Bell, who has joined Jones Lang LaSalle to head the company’s new high-end residential valuation service.
“There are several sub-markets within the overall apartment sector. These include central city apartments, good-quality 2-bedroom apartments, character apartments, luxury waterfront apartments & fringe cbd apartments, among others. Many of these sub-markets are showing – and look likely to continue to show – strong performance.
“The future of residential property in Auckland City must include a strong apartment component, as this offers a comparatively affordable entry into desirable suburbs, although apartment prices are rising along with the rest of the market in such locations.
“Free-standing homes are becoming too expensive for many people, particularly first-home buyers. This follows the supply & demand-driven trend towards increasing land values, which are the largest component of a property’s cost. The less land your property occupies, the lower the price, which leads directly to an apartment choice.”
According to Jones Lang LaSalle’s research division, there has been a 70.5% increase in total sales of apartments & multi-unit dwellings in the Auckland region over the past 5 years. In the first half of 2005 there were 1110 apartment & multi-unit dwelling transactions. But Mr Bell said this didn’t adequately reflect the performance of stand-out markets such as Mt Eden, which has seen an 88% increase in the number of apartment sales and 61% average price increase over the past 5 years.
Jones Lang LaSalle research analyst Kimberley Paterson said: “Apartments have now overtaken stand-alone housing in terms of new dwelling consents issued across the Auckland region, especially within Auckland City. By 2021, we expect the Auckland metropolitan area to be housing 371,000 more people than it did in 2001. This will require an additional 47,100 households by 2021, with apartments likely to represent just over half of all those new dwellings, going by current statistics.”
The researchers expect locations near the cbd will continue to be the most desirable, with buyers choosing to sacrifice on land and buy an apartment, instead of sacrificing location and moving to larger sections further from the city.
“Looking ahead, increasing transport costs, higher petrol prices & increased congestion are all likely to contribute to increased demand for centrally located apartments,” Ms Paterson said.
Mr Bell said Mt Eden provideda good snapshot of this market: “It is a well regarded residential location that incorporates both high-value residences & apartments. Here, when the average sale price for 2-bedroom homes is tracked against the average sale price for 2-bedroom apartments between 2001-05, there is a very close correlation, with a near-consistent 30% price differential between the markets, which should continue into the future.
“Within this wider trend, the success or failure of any individual apartment building will be purely the result of construction quality, the level of amenity both within the building and in the immediate area, and the overall liveability of the apartments.
“The value of poorer quality studio apartments is indeed likely to follow a downward movement because they fail to meet market demand in this regard. However, those apartments that perform better are set to follow the overall residential market over the medium to long term.”