Demand rises for inner-city apartments

GREG NINNESS
Last updated 13:29 16/12/2012

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The Housing market boom is flowing into Auckland's apartment market where prices are rising and good quality apartments are often sold without being listed for sale on the open market.

One of the features of the apartment market at the moment is the number of people looking to buy apartments to live in rather than rent out as investments.

This was evident at an auction of seven inner- city apartments held by apartment specialists City Sales last week, where several of the apartments were suitable for owner- occupiers.

Typically, smaller apartments, often referred to as shoeboxes, are sold as rental investments while owner-occupiers look for larger apartments, usually 50 square metres or more.

And people wanting to live in an apartment usually want a car park to go with it as well, according to City Sales sales manager Mike Richards, although he said that occasionally someone would buy one of the smaller units to live in.

One of the most popular apartments put under the hammer at last week's auction was a two- bedroom unit in the Connaught complex, near the Pullman Hotel and across the road from Auckland University.

The 72sqm apartment had a good-sized balcony and car park and had views across the harbour on one side, while the balcony looked back across Albert Park to the city. The building also had facilities such as a heated pool and a gymnasium for residents.

It was originally purchased in 2002 for $426,000, sold for $375,000 in 2008, then again for $439,000 in 2009 and sold last week for $490,000.

The sale was handled by City Sales agent Gabrielle Hoffmann, who said she had noticed a steady increase in the number of people looking to buy apartments for themselves to live in, over the last two years.

Mostly they fell into two main groups. There were empty nesters - older couples whose children have left home, and who no longer want the maintenance of a house and garden and are looking for something they can "lock and leave" when they go travelling.

Or they are younger couples who want to live close to the CBD but can't afford to buy a house in one of the inner-city suburbs, so go for an apartment instead.

For the same amount of money as the Connaught apartment sold for, someone wanting a house may have to look at buying a property in a suburb such as Glenfield on Auckland's North Shore, where the median selling price last month was $495,000.

However, Hoffman said most of the buyers she dealt with did not want to have to commute into the city to work.

Most were looking for apartments in older character buildings or in high-quality newer buildings where most of the people living in them were also owner-occupiers, she said.

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And although there were thousands of apartments in Auckland's CBD, very few fitted owner-occupiers' requirements.

Most of the apartments built over the last 20 years were smaller units designed as student accommodation, Hoffmann said. The shortage of supply was pushing up the prices of the better units.

Demand was so strong that apartments in good quality buildings such as the Connaught were often selling before they were advertised for sale, Hoffmann said.

Once somebody decided to sell their apartment, word would get around the building pretty quickly and other residents often knew people who wanted to buy into the same building, so they would put them in touch with the vendor with a view to negotiating a private sale.

Another apartment sold to owner-occupiers at last week's auction was a 60sqm one- bedroom apartment in the Heritage Towers block behind the Heritage Hotel. This had a balcony and a car park and the building had facilities such as a pool and gym.

The apartment was purchased for $290,000 at the beginning of the year, but sold last week for $323,000.

While people wanting an apartment to live in may face a limited choice, the smaller units are still a happy hunting ground for investors.

One of the smaller apartments to go under the hammer at last week's auction was a 30sqm unit in a building on Scotia Place, a cul-de-sac that runs between the top end of Queen St and Myers Park.

Although small, the unit had a small balcony and pleasant outlook over the park and a sitting tenant paying $320 a week.

It was originally purchased for $94,500 in 1998, sold for $115,000 in 2001 and then for $132,500 in 2005 and last week fetched $173,000.

Although that is a good gain in value over the years, it still provided its new owners with a gross return (before tax and expenses) of 9.6 per cent and City Sales estimated that would come back to about 7.5 per cent once expenses such as rates and body corporate fees were deducted.

- Sunday Star Times

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