Apartments fail to sell

Units at Zest, in Auckland's Nelson St, felt the pinch at auction.

Auckland's inner-city apartment prices look to be falling after a failed auction this week left vendors with unsold units and an industry chief astonished at the $3 billion sector's quick reversal of fortunes.

The bulk auction of inner-city units left agents hugely disappointed with a result that they called appalling.

Martin Dunn, head of apartment realtor City Sales, said only one of the 11 apartments his staff tried to auction on Wednesday had sold and many failed to attract a bid.

Vendors with passed-in units now faced the prospect of discounting prices even further.

"Some of the units are brand new but the vendors are freaked out about the market. They have decided they weren't very wise to buy and are dumping them for less than what they paid."

The failed sales follow a decline in Auckland's rental market. A study by Massey University last month found Auckland one-bedroom unit rents had dropped from $330 a week to $290 a week in the last two years, two-bedrooms from $420 to $372 and all units down from $362 to $340.

But property prices in central Auckland have continued to rise over the same period. The median price for a home - including apartments and houses - in Auckland City was $383,250 last month, up from $330,000 two years earlier, Real Estate Institute figures show.

Units hardest hit in the auction were developed by Robert Holden's Conrad Properties Two in the new 512-unit Zest apartment block.

"I'm not allowed to say what the reserves are but they are well below what people paid and they still failed to attract a bid, which has got me rather despondent, so we're telling vendors they will have to accept even less," Dunn said.

But Holden said demand was still strong. Radio advertising for apartment sales this week had sparked 112 calls to agents and three sales.

However, he acknowledged the market was "competitive" and that one-bedroom units in Zest were going for between $135,000 and $140,000.

"We're actually finding there's a lot of demand," Holden said, adding that auctions were just one sales method.

Dunn said three units in the Heritage building on Hobson St were put up for auction but only one sold; the two-bedroom penthouse unit with basement parking for one vehicle went for $455,000.

Some studio unit sales in the building had showed a 54 per cent drop in value. Units that had been selling for $200,000 were now fetching under $130,000, despite the fact that they generated $300 rent a week and were in a desirable building.

Dunn blamed bad publicity about the market, falling rents and an oversupply of apartments for the situation. "The publicity has sparked a degree of panic which we're not happy about. I have been saying fortunes will be made and lost in the apartment market in the next few years and, unfortunately, I'm right," he said. "Now is the time to buy if you want a bargain - not in six months' time."

Last night, BNZ chief economist Tony Alexander said the huge over-supply of apartments had been hanging over the Auckland market for two years. He predicted prices would fall in the next 18 months.

Flat out

* Auckland has about 10,800 apartments worth nearly $3 billion.

* At least 18,000 people live in inner-city units but the numbers are ballooning.

* A further 4704 units are going up and will be finished next winter.

At least 5000 more units are being planned, depending on market conditions.