Could the Auckland apartment market be about to catch a fresh head of steam?
It’s a suggestion from apartment specialists City Sales who say city limits on outward growth and growing congestion will see demand pick up again.
The real estate agency’s principal, Martin Dunn, said the two factors were precipitating a shift to inner-city living “not seen since the gentrification of the Ponsonby and Freemans Bay worker s cottages in the 1970s”.
But there would not be enough skilled tradespeople to cope with demand.
August sales figures out from the Real Estate Institute of New Zealand show early signs of spring in the Auckland market. Sales slipped a seasonally adjusted 1.5 per cent but the median price rose 1.4 per cent to $852,000.
Dunn’s comments are restricted to apartments but he said buyers were realising recent changes in property regulations were not as bad as feared.
Winter had seen sales volumes drop to a 21-year low due to a combination of foreign buyer restrictions, restricted lending, affordability caps and “most importantly” a predicted end of the apartment building cycle.
“People who want to sell have been holding back, people who want to buy have been waiting,” he said.
However, Dunn was convinced that demand was building in a market that had no way of meeting it.
The city needed 14,000 dwellings a year while in reality it was only building in the single-digit thousands. “Don’t be misled by the ‘thousands’ of new apartments coming to market. Many will never make it to construction”
“Our current prediction is that this pent-up demand is to be released over the New Zealand summer, and we’re seeing signs of this already.”
Gavin Lloyd, national director of residential projects at CBRE, said he couldn’t speak for the existing apartment market, but off the plans sales were showing early signs of recovery over the last two quarters.
He agreed with Dunn that some projects might not eventuate because “acute challenges” in the building and funding sector.
Well-funded developers would still get developments off the ground and well-heeled Australian developers were starting.to come into the market to fill the void.
But the fact was that even though apartment sales were down, there was sill underlying demand.
“The fact that some projects won’t be able to go ahead because they can’t be built or funded is just putting more strain on us producing more housing so it’s a bit of a vicious cycle.”