Tuesday, 9 October 2012
An update on the apartment market
There are around 43,000 apartments in New Zealand. Although this number isn’t particularly high when compared to other residential properties, apartments are still a popular inner city choice for many across the country. With space becoming a premium, and values across a lot of the main centres increasing, are apartment’s still holding value? We take a look at the past to see where the trends lie.
The top three areas with the most apartments are Old Auckland City (let’s call it Auckland Central), Wellington City and the North Shore. Auckland Central trumps the rest of the country with around 27,000 apartments, Wellington City has around 7,200 and the North Shore just over 1,500. Incidentally, there were about that many in Christchurch as well before the earthquakes.
So, not surprisingly these three areas also have the highest number of apartment sales in the country, with Auckland Central dominating the numbers.
Sales in Auckland Central peaked in 2003 then remained steady until early 2007. They drastically decreased after that, halving through 2008. Since, they have followed the national trend of residential sales, generally having low volumes. Although 2009 did see a mini recovery, sales have only started to increase since mid 2010 and are currently about 25% below the level seen in the mid 2000’s.
Sales numbers in Wellington City were high in 2003 to 2005 and peaked in late 2007. At this time the sale of whole apartment buildings (ie 74 Taranaki St) also went through, which helped to increase the number of sales. Sales dropped in 2008, and although they recovered slightly in early 2010, have been slowly dropping ever since. Currently, they are 70% below the 2003 to 2006 average.
North Shore was strong throughout 2003 to 2007 before also dropping away. Sales there have been slowly improving since early 2011 but remain 60% below the 2003 to 2006 average.
Values relative to the start of 2002
Changing our focus from sales to apartment values, we can see the early increase continue in Auckland Central, rising 25% to 30% until end of 2005. In late 2007, values dropped until early 2009, losing around 20% of their value. Since then, values have recovered, particularly since early 2011, and are now around 15% above the 2009 low.
In Wellington City values climbed steadily until the end of 2007, rising over 50%. Following the same trend Auckland Central displayed, values dropped 10% in 2008 before recovering in late 2009 and dropping away again towards mid 2010. Since this time, values in Wellington have been mostly flat.
North Shore apartment values continued in the same vein as both Auckland Central and Wellington City. The biggest difference was that since the 2007 peak, the North Shore dropped more, down 30%.
Focussing on the Auckland market
When we look at the apartment market in Auckland, we can also break it down by size (determined by floor area) and look at trends established within very small (up to 40sqm), small (40 – 70sqm), medium (70 – 125sqm) and large (more than 125sqm) apartments.
From 2002 on, the very small, small and medium sized apartments showed broadly similar trends in sales numbers, with them all dropping around 60% of their volume in late 2008. Small and medium are now about 23% below the peak volume, with very small about 28% below. In contrast, large apartments dropped just over half their volume and are currently still 33% down.
Auckland values relative to 2000
Small, medium and large sized apartments all grew in value by around 35% to 45% heading towards the peak. Following that, small and medium showed similar trends, both dropping around 25% in value, but have since recovered around 12% and 15% of that respectively. Large apartments dropped slightly less in value, around 15%, but have since bounced back even more, with values now sitting above levels seen during the previous peak.
In contrast, throughout 2002 – 2004 very small apartments only increased in value by about 10% to 15%. They then started to decline until early 2009, dropping about 30% of their value. Recovery has occurred since then, particularly in the last year, however, it has been slow.