Apartments in central Wellington continue to grow in popularity, but their prices are lagging well behind houses.
House prices have now returned to their peak levels of 2007 - before the global financial crisis - while apartment prices have yet to recover, figures from real estate data company CoreLogic show.
Very small apartments - of less than 40 square metres - have performed worst. They are still 19 per cent below their peak value before the crash.
The number of properties classed as apartments in Wellington, both new builds and reclassifications from existing buildings, grew from 5574 in 2006 to 7583 this year. Investment in apartments peaked before the crash, with many people losing big money, particularly in Auckland.
Tommy's agent John Kettle said some people who had bought in 2007 had seen $200,000 wiped off an $800,000 investment. "They are still not getting their money back," he said. "I have been selling [recently] mainly to owner-occupiers who don't seem to mind. They want to buy homes [eventually]."
Harcourts Wellington managing director Marty Scott said earthquake costs were a serious turnoff for buyers.
"The average owner-occupier doesn't want to be working their way around earthquake issues," he said. "I'm sure that's had an impact."
Sales in larger developments were driven by people who lost money after the financial crisis, he said. "[Investors] have bought them on the basis of capital gain which wasn't there. They get to the point where they are sick of servicing the property and they quit them."
Owners were also forced to compete on price against similar or identical properties, which drove prices down.
"There are no two houses exactly the same in Wellington, but there are plenty of apartments which are. If you want to sell . . . you've got to compete on price."
Wellington city councillor Nicola Young lives in a central city apartment. She said it was a lifestyle choice she made after her children left home, and she wanted to be walking distance from everywhere.
The council needed to keep up with building design and encourage good quality and good size, she said. "We don't want to see shoeboxes in Wellington. That said, my son lived in a 20-square-metre apartment in Stockholm and said it was perfect, so it comes down to design."
Apartments appeared to remain attractive to landlords, with 45 per cent of sales since January 2012 going to people who owned more than one property, according to CoreLogic.
PENTHOUSE BUY PROVES BIG SURPRISE
Richard Plimmer is a descendant of the "father of Wellington" John Plimmer, so he knows a bit about the city.
A month ago, he chose to buy an Evans Bay Parade penthouse apartment, something he never thought he would do.
It was in the same complex where he had been renting a place.
"I actually looked to buy a house . . . I was going to go back to Paremata, " he said. "I couldn't imagine ever living long-term in an apartment."
However, the Shott Beverages owner fell for the penthouse when he saw it was up for sale.
"When you walk into it, it's just phenomenal, the views you get. I suddenly realised it just suits my lifestyle.
"It's close to the airport, has secure parking and no maintenance. It's fantastic. And it's close to town."
The potential for capital gain was not the main attraction. "Apartments don't tend to rise [in value] as houses do."
That said, land shortages in Oriental Bay made apartment investment attractive there, and the benefit could flow to the other side of Mt Victoria. "There are opportunities for capital growth. If you look at the apartment buildings around Oriental Parade at the moment, like the big [Clyde Quay] Overseas Terminal one, [the apartments] were for sale for $2 million, which is unbelievable."
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