Apartment sales could be bargain
Big part of inner city’s population, are not in residence any longer
Bargain-hunters could be in luck if a financier’s forecasts are fulfilled on Auckland inner-city apartment values plummeting, although other experts believe prices will hold up in the city where some units are going for just $49,000.
John Bolton of Squirrel Mortgages said New Zealand’s closed borders meant foreign university students and overseas workers with short-term visas, who formed a big part of the inner-city’s population, were largely not in residence any longer.
“Apartment vacancies could rise due to a general lack of foreigners — foreign students, tourists, the diminishing number of people on work visas, here from overseas working in the tourism and hospitality and retail sectors, as well as a drop in demand for Airbnb,” Bolton said.
“That could push down values,” he said, although apartment mortgagee sales were unlikely due to historically low mortgage interest rates and options for investors to go interest-only on repayments.
Units 1c and 6f in Glen Eden’s Westward Ho Rd are being advertised by Ray White and Barfoot & Thompson for just $49,000 each, and they have carparks, although recladding work is also disclosed. Buyers must pay an extra $250,000 to $270,000 for repairs between November and next March, ads say.
Kiwibank mortgage calculator repayments on a 25-year loan for one of the units is calculated to be only $45 a week at 3.4 per cent interest, based on a $9800 deposit on the initial purchase price of $49,000.
CoreLogic yesterday noted the continued rise in market share for first home buyers of Auckland apartments, “now accounting for 15 per cent of purchases of existing Auckland apartments, up from 10 per cent two to three years ago. Some of that has come at the expense of the ‘new-to-market’ category, which includes foreign buyers.
Of course, that’s not entirely surprising, given the ban that was introduced in October 2018.”
CoreLogic data out in April also noted low levels of mortgagee sales nationally “but with unemployment starting to rise sharply, the chances are that these figures will, unfortunately, start to increase from now on. However, the hope has to be that the mortgage payment deferral scheme, for example, and the supportive attitudes that lenders are showing will help keep mortgagee sales as low as possible.”
Bolton said all indicators pointed to Auckland apartment values falling but he was reluctant to put an exact number on it. “Everyone expects there will be some softness in house prices, although that’s hard to see right now. But one part of the market where we really do expect to see softening is Auckland apartments because they’re harder to borrow against, which means they’re usually not for first home buyers. A lot of smaller apartments have been built and there’s not a lot of appeal of those to owner-occupiers,” Bolton said.
“There’s now weaker demand from buyers, but on the supply side, there’s a lot of new units being finished,” he said.
Without the thousands of foreign workers and students being able to live in Auckland, Bolton says rentals will be “hit hard”, potentially driving up vacancies and also giving those tenants who remain in the market an upper hand.
Foreigners could also sell their Auckland units, further flooding the market. Bolton said some developers targeted foreigners, particularly Singaporeans, and he anticipates a declining appetite from that market.
“Overseas owner quits! Buy today,” City Sales says of the July 22 auction of a onebedroom, level-nine 48sq m Spencer on Byron unit in Takapuna.
CBRE’s NZ market flash research from Tamba Carleton on June 22 said: “Between November 2019 and January 2020, 207 apartments pre-sold off the plan in Auckland region, four fewer than the 211 recorded for the February to April 2020 quarter.”
Today, Carleton said many factors were influencing Auckland apartment prices and values. “In the first three months of 2020, we had 30,472 people arrive in New Zealand to live, of which 6898 were New Zealand/Australian citizens. I only have data for April, but of the 500 arrivals in April, 424 were New Zealand/Australian citizens and there is anecdotal evidence that the inflow has continued in May and June,” she said.
ANZ yesterday dropped the one-year fixed mortgage interest rate to 2.55 per cent, she also noted.
Although there was a rent freeze during lockdown, the bond data showed Auckland rents went from $568 a week in January to $578 a week in June. “So mortgage payments have come down with interest rates and rents have gone up, giving a better yield for investors,” she said.
“This is not like the GFC where 12,000 CBD apartments were completed during four years, which eventuated in oversupply when student occupier demand fell away. The supply pipeline has been spread right across Auckland, and there is a diverse mix of buyers including owneroccupiers, who are buying their first home or downsizing.
“On balance I see apartment values being resilient, more so than during the GFC, and this is because the sector is more mature and diversified, as well as being generally cheaper than stand-alone dwellings.”
There’s now weaker demand from buyers, but . . . there’s a lot of new units being finished.
John Bolton of Squirrel Mortgages