Market Report 2022 June 27

Where are apartment values at right now?

Market Update

Where are apartment values at right now?

Market Update - June 2022

June 2022

The Auckland residential property market is said to be down 10.2% from its November 2021 peak. However, this is an overall average and when you look at specific locations and property types the story is often very different.

Market Report 2022 June 27

The Auckland residential property market is said to be down 10.2% from its November 2021 peak. However, this is an overall average and when you look at specific locations and property types the story is often very different. 

Waiheke is still rising, up 2.7%. Waiuku is up a huge 5.3% and on the other end of the scale, I'm seeing sections in South Auckland selling for 40% less than they were last year. 

So, what specifically is happening in each one of the Auckland apartment categories?

Well, it's certainly not an exact science. What I have done is categorised the last 6 weeks of apartment sales...CBD Investor, CBD Owner-occupier, Suburb Owner-occupier, High end, you know the drill. Then reduced this list to the buildings in which the sales occurred. I then looked to sales in these buildings over two different time frames: the housing peak last year and the time prior to COVID, analysing the change in values.

Unfortunately, some apartment categories didn't have enough data to produce reliable results. However, the main categories (most common apartment types) did give a very good view of where we are at. For the rest, it is more about where I see it as sales come into the company. (We make up about 20% of the market in our catchment area.) So, a very good estimate.

Auckland Residential Property Average (for reference)

32.4% UP from Pre COVID levels. (Varies from reporting agency) 
10.2 % DOWN since Nov 2021 housing peak. (CoreLogic)

The gains overall for Auckland, especially houses, have been huge so even with a value correction, every owner who purchased pre-COVID is in a great position. 

CBD Small Investor - Under 40m2   

19% DOWN from pre-COVID levels. 
11% DOWN from Nov 2021 housing peak.

This is the hardest hit market in Auckland if not New Zealand. We all know what the CBD has experienced due to COVID, add that most banks don’t lend under 40m2 and students as well as working visa immigrants still haven't really returned and you have the perfect storm. The result: Owners compete for buyers with the only power they have left. Price.

Our director and his father own a lot of these units... and we are fighting for every thousand in this category, yet right now it's a losing battle.  

On the other hand, I haven't seen better buying since 2009 - 2010 and many current owners are starting to realise this and coming into the market - They know what they should be worth and realise the pot of gold ahead for those prepared to play the long game. If the banks would do better than 50%, I would be doing the same.

CBD First Home Buyer - Under 75m2

2% UP from Pre COVID levels
7% DOWN from Nov 2021 housing peak.

Very interesting market this one. This category would be down overall in my opinion if it wasn't for the one-bedroom market experiencing quite a lift due to the lower price point as two bedrooms overall have decreased. However, this is currently getting eroded as you can see. 

So why have values not been hit as hard as the smaller investor stock? Owner-occupiers can get finance. With the investor stock, a buyer needs a 50% deposit shutting out 8 out of 10 apartment buyers. No matter how cheap the under 40m2 stock gets most buyers out there can't make it work.

Small tip: The rarer 2 bedroom is so undervalued. Once I get my finance sorted and with the CBD transformation just around the corner I'll be purchasing in this category. Once the market finds its bottom that is.

Fringe and Suburb First Home Buyer - One and Two Bedrooms Under 75m2

7.3% UP from Pre COVID levels.
7% DOWN from Nov 2021 housing peak.

Apartments in the suburbs were the top-performing category during COVID and currently are performing very similarly to houses. Interestingly it appears the further out the suburb the more vulnerable the apartment value. However, I don't have enough data to back that up... let's see where we are at in a few months. 

Character Apartments 

My estimate is that everything under 40m2 due to bank finance restrictions, is down around 15% from pre-COVID and 10% down since the housing peak. 

Above 50m2... there have been hardly any sales. I would like to think the above 50m2 stock is holding its value... but I am a little bit biased. I love this category due to the rarity of character apartments and the history they hold for us all. 

There simply is no more supply of this stock which adds protection to values in times like this so I am relatively confident their values will hold up better than most.

High-End Apartments in Both Our CBD and the Suburbs. 

If people need to raise capital, they sell their rental property not their home and high-end apartments are more often than not lifestyle related. 

Those who were selling if they didn't get within a reasonable range of what they were looking for have mostly pulled their apartments from the market or left them hanging. The result is again not enough sales for any type of conclusion. At a guess, a great apartment that ticks all the boxes is still selling well and not more than 5% down from last year. 

But realise for this apartment category, each apartment is often so unique, and more often has special fit outs so has to be judged on a case-by-case basis. 

Positively though, the above 100m2 new-build and recently built market looks to be the least affected apartment category. Why? This specific category is in demand by the baby boomer generation and there is not enough of it. Plus, their lifestyle goals don’t involve waiting around for the market. Go Mum and Dad. 

So, the market is the market, and my job is to give you the most accurate information so with all your other sources you can make the best decisions for you. So please don't shoot the messenger here.  

Next month I'm going to dive into new rail stations, looking at other cities that have had new rail services put in and the effects on values. Did they increase? If so, how far out? And what about stations that already existed that were just more connected? 

And as always...

What's My Apartment Worth?

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      Where are apartment values at right now?