Colliers Auckland Apartment Market Report

Auckland Apartment Market Report.

Summary below.

• It includes analysis of CBD, city fringe and suburban development to the end of 2018 and commentary on pricing and affordability.
• It notes the Auckland apartment market has changed to focus on owner-occupiers not investors, and as a result the number of studio apartments planned has declined significantly while three bedroom typologies are becoming much more common.
• It concludes that generally development is keeping pace with population growth in the CBD but that the quality and size of apartments increasingly demanded by purchasers means that even some two bedroom apartments won’t be ‘affordable’ by the Council definition of 75% of median Auckland price. This means that with the price most new apartments are being sold for, they aren’t going to help solve any ‘affordable’ housing issues – especially with respect to designated SHA (Special Housing Area) requirements.
• It notes that apartment price increases are helping the feasibility of new developments to occur. So ‘ironically’ - high prices are stimulating supply but new apartments are not helping out with affordability.

By The Numbers

• There will be 20,472 CBD apartments by 2018, up from 17,395 at the end of 2014.
• 44% of the new city-wide apartment supply in 2015 to 2018 will be in the CBD, 28% in the city fringe and 28% in the suburbs.
• That totals 6,601 new apartments across Auckland.
• 640 apartments per annum are needed in the CBD. Supply is on track from 2015 to 2018, but 2013 and 2014 only added 62 apartments to the stock.
• The three bedroom median apartment price Auckland-wide exceeds the three bedroom non-apartment median price.

Key Findings

• Purchaser demand is highest in CBD, and CBD fringe, locations reflecting apartment residents’ requirement for good, nearby amenities. This matches the pattern of office demand, where convenient, accessible locations are also in high demand.
• The pace of development in the CBD is almost keeping pace with projected CBD population and employment growth. This is unlike the broader residential market where supply is running well behind population growth forecasts.
• Apartment supply has been boosted by recent sale price increases. This is allowing developments to become feasible at land values that equal or exceed values for alternative uses, such as offices. Ironically, the price of accelerated supply is increasing unaffordability.
• Robust price increases are being driven by this demand and supply imbalance - along with low debt costs, high net immigration, and confidence in the economy.
• While all these remain positive, no price slowdown is expected in the short term. However, overall residential annual price escalation over the last 20 years in Auckland has been 7.4% on an annual compounding basis. This is much lower than the 11.2% pa over the last five years, calculated on the same annual compounding basis, and in the medium term, markets usually revert to trend.
• Across the city, by the end of 2018 we estimate an extra 6,601 units will be housed in a further 80 buildings, averaging 82 units per development. At that time there will be around 459 apartment buildings in total, averaging 69 units each.
• The extra 6,601 units include 1,112 student accommodation apartments.
• By the end of 2018 that means 31,654 apartments, including student accommodation, will exist across the city. Of these, 20,472 (or 66%) will be in the CBD, 5,969 in the city fringe (19%) and 5,105 in suburban locations (15%).
• This demand surge is well-balanced, with a much higher proportion of owner-occupiers than in the 2003-2006 construction boom when most of the CBD product was aimed at investors.
• New apartment product commands the highest selling price per square metre of any dwelling typology. This is frequently more than $10,000/sqm gross as opposed to typically $5,500 to $7,000/sqm for terraced typologies, or large detached new homes.
• The risk of over-supply in CBD and fringe markets is slim, with pre-selling hurdles providing a useful self-correcting mechanism. That is, where a planned development fails to sell 50% or more ‘off the plans’ it will usually be abandoned, deferred, or re-designed to better match buyers’

Full report here.

ENDS

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