Flood of apartments sends city rental rates tumbling

The number of Auckland apartments continues to grow

The burgeoning number of inner-city Auckland apartments has forced rents down nearly 20 per cent in the past three years, a real estate firm's figures show.

And some apartments are selling for 35 per cent less than their original price.

Martin Dunn, managing director of apartment sales and leasing specialist City Sales, said rents peaked in 2003, averaging $410. By 2004 they had dropped to $355, then $344 by 2005 and now they were around $331.

"The drop is not purely a softening in the market but also reflects a proliferation of smaller, cheaper units built in the last three years," Dunn said. Some apartment sale prices were also dropping - such as a 35 per cent drop in one unit's value. A shoebox one-bedroom unit which originally fetched $195,000 recently sold for $127,000.

But the value of more desirable units had risen, such as unit in Howe St's Highgate, which originally sold for $415,000 fetching $455,000.

Dunn said an extra 3636 new apartments had been built in the past year but most were occupied.

"There's almost nothing left to rent," he said, adding that in January, City Sales had 68 vacant apartments.

"Then, the owners were screaming for rent but now we have only 14 units available today and tenants screaming for a home.

"The appetite for city living just gets stronger each year."

City Sales' first auction resulted in seven sales from nine properties within 24 hours.

Key drivers behind the rental sector were tertiary education students as well as "traffic beaters" - young professionals preferring to live in the city and avoid the traffic problems. "With the cost of petrol up nearly 50 per cent and a 40-minute drive from close suburbs, the norm these days among Auckland's smart young things under 35 is for them to flock to the city for convenience, fun and thrift," Dunn said.

Dunn hopes by the end of the year to promote a new scheme which allows students to negotiate with landlords or property managers to keep their units and save them the trouble of shifting annually.

They would pay a lower rent over the summer holidays but the trade-off would be a steadier stream of rental income for investors.

The scheme would give owners more certainty and income.

"In the past, crossing our collective fingers hasn't worked," Dunn said.

GOING, GOING, GONE

A sample of City Sales apartments sold at or after auctions:

* Princes Wharf, 1 bedroom, no carpark, sold under hammer, $194,000.

* Viaduct Point, 2 bedrooms, sold post-auction, $390,000.

* Harvard on Hobson, 2 bedrooms, sold post-auction, $155,000.

* H47, 47 Hobson St, 2 bedrooms, 2 carparks, sold post-auction, $345,000.

* The Statesman, Parliament St, 2 bedrooms, 1 carpark, sold post-auction, $336,000.

* Knightsbridge, Karangahape Rd, 2 bedrooms, 1 carpark, sold at auction, $220,000.

* The Aucklander, Rutland St, 1 bedroom, no parking, $129,000.