Property Report: Fancy a spot of capital gain with your yield?

A two-bedroom apartment with a carpark in the Ophir complex on Newton Rd attracted three offers in two days, selling for $305,000 recently. It might have fetched $280,000 a year ago. Photo / Supplied

Since they first rose 20 years ago, Auckland's CBD apartments have been loved just for their yield. Perhaps that's about to change.

Whisper them gently, but here are a couple of words that until the last year or so haven't been shouted much around the Auckland CBD apartment scene: capital gain.

After donkey's years of collapsed values with just decent rental yields keeping prices from falling right through the floor, the news may be starting to get a little brighter for downtown apartment owners.

Hundreds of people have lost their shirts over the years after paying silly prices, and plenty of others have been hit even harder in dodgy spruiker deals.

Many bought off the plans at levels which now seem ludicrous: $10,000 a square metre in some cases, putting a $400,000 price tag on a tiny apartment which may or may not have been well built.

Leasehold land added to the torture, and how naïve it now seems that anyone could have signed deals for close to freehold rates for ground they would never own.

At the prices paid through the 90s and up until the credit crunch hit, many of the investments were built on sand. The only happy people were the developers.

But those who hung in are now starting to see some black ink trickle through the sea of red - which must come as some relief to long-time holders who bought in the early 1990s and, up to 18-months or so ago, were staring at valuations which showed no progress.

Their saviour, at least in recent years, has been high rental yields as the face of Auckland changes and a premium is placed on downtown living, especially by younger people.

Now first-home buyers, dismayed at how little their money buys in the suburbs, are turning to the CBD to find their first step on the real estate ladder.

The anecdotal evidence is that average rental yields of between 6 and 9 per cent are continuing to underpin prices and that first-home buyers are creating competition, further encouraging growth in value.

These are not boom times in the downtown apartment market, but the demand for rentals is constant and sales activity has certainly increased. It all adds up to something new for weary owners - the prospect of reasonable capital gain. Not in real terms for the long-term holders, of course, but after the years of distress many will be happy to simply get above the price they paid.

Recent entrants to the market may have done quite well. Apartment sales are running at between 100 and 120 a month among the 24,000-unit market and, according to City Sales' principal Martin Dunn, the last 14 months has seen quite a lift in capital gain.

He points to one sale handled by his company last month: a two-bedroom apartment in Newton Rd, with carpark, which might have sold for $280,000 a year ago. It drew three offers in two days, selling for $305,000.

"Shoebox" apartments - two bedroom units of 36sq m - were selling around $120,000 two years ago, he says, and today were fetching up to $180,000. In the same period, priming the price, rents have lifted from $300 a week to $420 a week.

But it's the first-home buyers chasing bigger apartments who are having the greatest influence and are willing to pay more than investors, says Dunn.

Until 2009, 70 per cent of the CBD apartments were in the hands of investors. But over the last 18 months or so the level of investor sales has come down to 55 per cent as more owner-occupiers move downtown.

As Dunn notes, that shift "changes the culture in a positive way". Live-in owners bring with them a greater sense of pride in their property than renters and, over time as the ratio to renters rises, there will be a better "feel" in some blocks - translating to potential price rises.

In the future, capital gain may be the long-anticipated icing on the yield cake of the CBD.