A 60-unit Wynyard Quarter building won't be completed until 2018 but almost 80 per cent of its apartments were sold before construction even started.
A 60-unit Wynyard Quarter building won't be completed until 2018 but almost 80 per cent of its apartments were sold before construction even started.
Soaring house prices, shifting public attitudes and better bank loans have been credited for encouraging more people to bet their fortune and future on unbuilt apartments.
But some in the business are warning those who put their faith in apartments bought "off the plan" to choose carefully.
Three main groups were increasingly buying unbuilt apartments in Auckland, Barfoot & Thompson director Kiri Barfoot said.
The North apartments.
These were first-home buyers, corporate executives wanting a place in the city, and empty nesters or baby boomers downsizing to apartments for lifestyle reasons.
Ms Barfoot said in some new inner-city apartment blocks, most units were snapped up more than two years before anybody would be able to move in.
One 60-unit building in Wynyard Quarter won't be completed until 2018, but the real estate company said almost 80 per cent of its apartments were sold before construction even started.
Advocates of buying off-plan argue the tactic allows people to build up savings, sell existing homes without hurrying, and for some new buyers, take advantage of KiwiSaver grants.
Many people still longed for the quarter-acre dream, but felt Auckland prices made that unattainable, Ms Barfoot said.
"Some people would prefer to buy a freestanding house that's brand new, but the prices are just out of this world."
The irritation of long commutes from suburbs to the CBD was another factor fuelling the rise of city apartments, she said.
Apartment Specialists director Andrew Murray said it was important to recognise overseas investors were also buying many apartments off the plans.
The Antipodean apartments.
He said older buyers mostly preferred suburban apartments, and generally weren't ready to embrace CBD apartment living.
"They want to stay in their own village."
The younger generation had a different view, he said, but that was partly since buying a freestanding house in a desirable area was for many impossible.
"Unless you've got mum and dad to help you out, good luck."
Owner-occupiers were more dominant in suburban apartments but in the CBD, investors were more prevalent, he said.
Mr Murray said the quality of apartments in Auckland had generally improved since a rash of "shoebox" dwellings sullied the industry last decade.
He said bad developers were still finding loopholes but honourable ones recognised a "trusted legacy" was needed if they aimed to sell more apartments in the future.
Mr Murray said buyers should take digital images and glossy brochures of some planned apartments with a grain of salt.
He urged aspiring buyers to check as many details as possible, and meticulously research furnishings, chattels and fittings.
Auckland-based mortgage adviser Bruce Patten of Loan Market said banks were also driving the upsurge in off-the-plan buying and often demanded developers pre-sold a majority, or in some cases all units, before breaking ground.
But simple desperation was motivating some buyers, he said.
"A lot of it's due to lack of stock, as much as anything. Some [people's] fallback position is 'Well, let's just at least get something'."
Despite political rancour over intensification, Mr Patten said banks now viewed intensification in Auckland as inevitable, and were gearing up accordingly.
He said banks generally viewed apartments as a less risky option now than a few years ago.
"Prior to earlier this year, the maximum you could borrow on an apartment, any apartment, was 80 per cent."
That had risen to 85 or even 90 per cent in some cases, he said, making apartments a more realistic option for first-home buyers.
In 2013, Reserve Bank rules clamped down on bank loans to people who stumped up deposits of less than 20 per cent.
But new builds were exempt from the restrictions, as long as construction had either not started or was at an early stage.
Mr Patten said buyers should watch out for developers who over-capitalised or didn't have enough funding, as happened with several inner-city projects that collapsed around 2007.
"There will be developers that will fall over during this massive building process."
Last week, the developer of the 10.5ha, 450-unit Spring Park project in Mt Wellington went into receivership.
Mr Patten said big projects remained sensitive to downturns in the national and global economy. But he said most people had more secure deposits now than in 2007, when the global recession hit.
Buyers' checklist
• Research developers' history thoroughly, including possible company name changes. • Ask detailed questions about parking, storage, chattels and furnishing. • Check body corporate fees and obligations. • Research the difference between freehold, leasehold and fee simple owners. • Don't let photoshopped images fool you - what looks good in a brochure may not in real life.
Doing the sums
• First-home buyers in Auckland buying a new property or off the plans for under $550,000 can apply for a KiwiSaver HomeStart grant. • For Hamilton, Tauranga, Western Bay of Plenty, Kapiti Coast, Porirua, Hutt Valley, Wellington, Nelson, Tasman, Waimakariri, Christchurch, Selwyn and Queenstown Lakes the limit is $450,000. • Everywhere else, the maximum is $350,000.
