Prices are the same as they were five years ago in one suburb. Is it a good time to buy?
Prices are the same as they were five years ago in one suburb. Is it a good time to buy?
It might sometimes feel like it’s manifest destiny for New Zealand house prices to rise - yet there is one suburb where prices have stagnated over the past five years.
Apartment-filled Auckland Central’s $564,300 median house value is the same as it was in 2018, with its zero per cent growth ranking it as the nation’s worst performing housing market, analysts CoreLogic said.
Every other suburb or town has experienced at least some capital growth in the last five years.
Joining Auckland’s CBD as the worst-performing suburb are the city’s other apartment hot spots, Newmarket with capital growth of just 4.6 per cent and Grafton with 6.2 per cent growth.
CoreLogic chief economist Kelvin Davidson said three years of low immigration and international tourist travel had hit Auckland’s apartment market.
“Apartments cater for that type of market for students and Airbnb guests,” he said.
“Without that demand, there’s been this price pressure and people won’t have been as confident they can make a return on those properties if they can’t rent them out - that’s reflected in flat prices.”
Davidson said Auckland Central and the apartment market was a unique part of the nation’s housing market.
Auckland house prices have been on a rollercoaster in recent years, skyrocketing after the Covid pandemic began and then falling again in the past 12 months.
Scott Dunn, an apartment specialist with City Sales real estate agency, said Auckland’s apartment market had also risen gently during the past five years, only to also fall in price in the last 12 months.
But unlike the market for housing, the initial Covid pandemic and closed borders hit the apartment market.
“It was a real shock to the system, how many tenants that we lost in Covid,” he said.
He said while tenants in the suburbs tended to be families and resident Kiwis, many tenants in the city are typically international students or work visa holders.
When borders closed as many as half of Auckland Central’s apartment tenants left, he said.
With most CBD apartments owned by investors, landlords then found it hard to find tenants, bringing down the rent and yield they earned and in turn bringing down apartment prices, Dunn said.
Pete Evans, national director with Colliers and a residential property development expert, said another impact on Auckland’s CBD from the pandemic was the pressure on retail.
Closed borders and lockdowns had hurt retail businesses and potentially reduced some of the vibrancy and draw of inner city life, he said.
Yet despite the troubles facing the apartment market, CoreLogic’s Davidson said Auckland Central property prices may pick up in the next few years as international students and migrants return.
Will the sun shine on Auckland's apartment market? Photo / File
“Auckland Central might actually do a bit better over the next few years, because it some ways it could be undervalued,” he said.
However, he said the pick-up in prices would only take place if there was not a big supply of new CBD apartments about to be released onto the market.
Colliers’ Evans agreed, saying he didn’t believe there was a large number of new CBD apartment projects in the pipeline.
Dunn also predicted that those buying now would likely see some capital gain over the next few years.
But he also said many investors focused as much on rental yields when buying CBD apartments as they did on value rises.
That was because the CBD was different to suburbs, such as Grey Lynn, which had a lot of houses, while any increase in new housing stock tended to move slowly, ensuring there is not a dramatic oversupply of new properties.
The CBD by contrast could in future be home to tens of thousands of more apartments in the years to come, meaning that the demand for new properties is rarely as ferocious as in other parts of the city.
He also tipped the flow of international students into vacant tenancies to be a bit slower.
That was partly because Auckland University had been involved in completing thousands of new student accommodation suites during the Covid pandemic, with Dunn tipping these new properties would likely soak up some of the demand from returning students over the next year or two.
Along with Auckland’s apartment-filled inner suburbs, the northern fringe suburbs - including Rosedale with a 12 per cent five-year capital gain, Albany Heights with 18 per cent and Brown’s Bay with 19 per cent - were among the other worst-performing markets in the nation’s biggest city.
The best-performing suburbs included beach suburbs further north, such as Ōmaha with a 70 per cent gain, Leigh with a 58 per cent rise and Matakana with a 54 per cent rise.
