Students key agents of change in inner city apartment market

Flatmates, Della Halsall, Melody Guo and Kelly Remnamp in their Auckland City Apartment. Photo / Paul Estcourt

Auckland's central business district has been transformed in the past two decades - and Chinese students such as Melody Guo have been one of the key change agents.

Ms Guo, 20, a fourth-year law and arts student at Auckland University who came to Howick with her parents 10 years ago, flats with Kiwi students Della Halsall and Kelly Remnant, both 18, in a downtown student apartment block.

If she had been there in the 2006 census, she would have been one of 7700 Asians who made up 51 per cent of the 15,100 people in the two Auckland Central area units from Victoria Park east to Stanley St, and from Customs St to Karangahape Rd. The 3400 Chinese were the biggest part of the Asian group. The vast majority of them lived in apartments.

City Sales managing director Martin Dunn, who has been selling inner-city apartments since the zoning changed to allow them in 1991, says downtown apartments have multiplied more than 100-fold since then from just 226 to 24,000 - a big increase even since 2006. "Growth has been driven by immigration and by the alternative cost of housing," he says.

Ian McGowan of valuers Seagar and Partners says most city apartments are small and have been let to students. Three out of eight, or 54,200 of the 147,600 Chinese people in the country at the last census were aged 15 to 29, compared with just 20 per cent of all New Zealanders.

"The primary effect [of China] has been the amount of students that have flooded the market and increased the demand for rents in inner-city apartments," Mr McGowan says. "The demand is a catalyst for investors buying them because they know there is a rental demand."

At the peak of the language school boom in 2003 there were 56,000 students in New Zealand from mainland China alone, most of them studying within a few blocks of downtown Queen St.

The influx of young residents looking for food and entertainment spectacularly revitalised the inner city, turning Queen St briefly into an Antipodean Hong Kong.

Developer Ron Hoy Fong remembers the dramatic change from a moribund downtown area that had lost business to the suburban malls.

"You could stand on a Queen St corner 10 years earlier and there was no one in town," he says. "Now it's a real mosaic down there and it's bustling and booming."

Ms Guo chose to flat in town because she wanted to be close to university. She often studies late at the library, and also enjoys the nightlife.

But once Chinese students helped to create a market for apartment living, Kiwis have taken to it too. Ms Halsall, a first-year student from a rural family near Otaki, says: "I love living here, it's just so different. It's nice and central, everywhere's within walking distance."

Property investor Andrew King says New Zealand was actually behind other developed countries in taking to apartment living due mainly to economic forces.

"It's the cost of petrol going up, the fact that Auckland hasn't got such a good public transport system," he says.

"A lot of people are working in the city and choosing to live in the city and be close to bars and restaurants."

Dunn says the 1991 zoning change that let housing into the central business district was driven by a glut of vacant offices after the 1987 sharemarket crash. Kiwis as well as immigrants have been keen to move in because they are having children later and taking longer to save for a first house.

Dunn's database of about 30,000 apartments shows that only about 10 per cent of them now have Chinese tenants and only 13 per cent are owned by Chinese investors. "But it's very international now. There are a lot of Australians who have invested in our apartment market. When we do our fortnightly auctions it's very rare to have a vendor here - they are in Australia, the East, London, America.

"It's been a 70/30 investor/owner-occupier market ever since 1991 until just in the last year it's ... now running at around 60/40 or 55/45. So it's actually culturally changing right now. I think within two years it will be 50/50."