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The Apartment Revival

As any experienced investor will testify, property is all about ups and downs. Nowhere is this more evident than in the apartment market, especially in our central cities.

By: Sally Lindsay

1 June 2021

Turning back the clocks to mid-2020, we saw Covid-19 and lockdown, rental freezes and experts predicting property price plummets. A year on the market is soaring, with median prices up nationwide by nearly 25% year-on-year (according to REINZ data for April).

A year ago, the inner city of Auckland was a wasteland. Foreign students had fled back home, and you could
see the tumbleweeds blowing down Queen St. It was a terrible time for investors in this market: within one week, over 1,200 apartments were vacated. Investors dropped their rents, new tenants were securing apartments for under $200 a week, and the future was unsure.

But fast forward to 2021, and the market is up and running again. Now tenanted by local university students, and renters who work in the city and want to avoid the harrowing commute and enjoy the inner-city lifestyle, apartments are once again looking appealing as an investment option.

With a (relatively) low entrance price and good yields, apartments have burst out of the inner city and
are now appearing in suburbs. Zoning changes around the country allow developers to build higher, larger and wider: instantly increasing density and adding much-needed housing stock to the parch-dry market.

The suburban builds are far more cost-effective: according to our experts, a CBD apartment block will cost around $5,500 per m2, with suburban builds (without parking or garages) being around $3,500 per m2.

Apartments are the lead for this issue, but there is a lot of other interesting content for you to dig your teeth into. We profile Nick Gentle, co-owner of iFindProperty, and a successful investor in his own right. His property journey was inspired by the desire for freedom from the dictates of office work: it’s a goal that he’s smashed, and he’s loving the time he gets to spend outdoors and playing with his 10-year-old son Jo.

We look at the PrivacyCommissioner’s investigation into practices around the collection, dissemination and storage of tenants’ information, and get some interesting insights from those at the coal face.

Queenstown and Wānaka are also featured: although the tourist industry has been hard hit by Covid-19, the
real estate sector is holding up comparatively well.

And as we go to print, a Budget update. While there were no hefty body blows for investors in the 2021 Budget, there was an announcement by Finance Minister Grant Robertson that house prices will experience a plunge. Treasury has stated that they predict a peak of 17.3% year-on-year growth by the June quarter, but that this will plummet to 0.9% by June next year. He states that the measures put in place to curb investor spending will be a key reason for the drop; but as we are all well aware, property price predicting is a mug’s game.

There are so many unknown variables that come into play as time passes, and you’d be hard pressed to find any economists happy to stake their reputations on such a dramatic market correction. Time will tell.

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