Wellington apartment market close to free fall

BY AMANDA FISHER AND CATHERINE HARRIS

Wellington property agents are offering two weeks' free rent and a car park to entice tenants into apartments.

The capital is the only city where supply is outstripping demand, as the rest of the country faces a severe shortage of rental properties.

There were 444 vacant apartments on Trade Me yesterday, with 1099 more being built, or due to be, in the city over the next 18 months.

Some analysts fear the apartment market will crash.

Realestate.co.nz chief executive Alistair Helm said an enormous range of apartments was flooding the Wellington market. The trend began early last year and the market had "built and built and built". His company was listing up to 120 new apartments each month.

Many developments were started at the end of the market peak and before the change of government in 2008. "They come on to the market and the world is changed."

The pace was not sustainable. "Something would have to give if there's an excess of supply and there's not enough demand to meet the market."

Wellington Property Investors Federation president Jackie Thomas-Teague said the recently opened 326-unit Soho apartment block in Taranaki St was offering apartments at "seriously underpriced" rents.

This was "an insult" to longer-established tenants and putting pressure on the wider market. "If Wellington's not careful it could well end up in a similar situation to [the property crash in] Auckland."

Personal Property Management owner and manager Aaron Graham said Wellington rents were down "particularly in the apartment market", although there had been a spillover effect on the rest of the city's rental market.

The Soho apartments almost doubled the number of Wellington apartments on Trade Me overnight, he said.

People tended not to move during winter because of the weather and most fixed-term leases ended in February or March. This was exacerbated by Government job cuts and firms reducing international secondments to New Zealand.

This had driven apartment prices down. "I've seen two-bedroom apartments being advertised for less than I let my one-bedroom apartments for. The whole market in Wellington is feeling downward pressure."

Mr Graham expected the trend to last until at least February, when most leases ended.

In Lower Hutt, listings fell 27 per cent and inquiries rose 23 per cent, compared with the previous year.

Wellington property developer Ian Cassels said Lower Hutt followed the national trend because it had fewer new buildings. Wellington had "a lump" of apartments with high rental expectations and a small market to fill it.

A Wellington City Council spokesman said there were up to 6500 apartments in the inner city.

Taylor Property Plus was offering one week rent-free, with no letting fees, and all new tenants went into a monthly draw to win a three-month free car park, valued at $780. Other agencies were offering two weeks of free rent.

A council survey last year showed about half of all apartment-dwellers lived in a two-person household, and most chose to live in the city for the lifestyle. Forty-four per cent earned more than $100,000 a year, 80 per cent were New Zealand European and 60 per cent were between 25 and 54.

STUDENT SHAKES OFF THE SUBURBS

Massey University student Penny Thomas is a convert to inner-city apartment living.

Ms Thomas, 22, has been living with five flatmates in a five-bedroom, third-floor apartment in Haining St in the central city since the beginning of the year. She was raised in Seatoun, but says she would not return to the suburbs.

"It's perfect. I think for what we're paying, we have got a really great location and I think it's probably cheap for what we're getting."

She paid $160 a week and said she had friends living in Wellington's suburbs who were paying more than that and had transport costs as well.

"Once you factor in having to get buses and not having the convenience of being able to step outside your door and be at uni in five minutes, it'd be definitely worth living in a smaller house."

Trips to the supermarket, nights on the town and "midnight sessions" at university were all made easier by her location.

CITY VS. SUBURBS

Lambton: $600 (apartment)

Lambton: $533 (house)

Wadestown/Thorndon: $562 (house)

Johnsonville/Newlands: $406 (house)

Tawa/Grenada North: $356 (house)

Upper Hutt suburbs: $320 to $384 (house)

Lower Hutt suburbs: $296 to $463 (house)

Porirua suburbs: $282 to $383 (house)

Kapiti Coast: $312 (house)

Carterton/South Wairarapa: $240 (house)

- © Fairfax NZ News