SHARON NEWEY consults the experts on Auckland's escalating apartment sector.
There's no denying that Auckland's apartment market is growing. With 8500 already in use and that amount again either being built or proposed, it's a vibrant part of the city's property market.
As with any fast-growing sector, fears have been expressed about the sustainability of rental demand, and also about the small size of some apartments.
Bayleys Real Estate residential manager Kirsty Stevenson believes that an apartment that is "reasonable and liveable" measures about 70sq m for a two-bedroom apartment and 30sq m to 40sq m for a "small studio". They would also need to have a car park.
Bayleys tends to sell projects that will attract owner-occupiers and high-end investors. Stevenson reports strong growth in the middle to upper end bracket of apartments. She advises potential investors to not only think about who will be attracted to an apartment as a tenant but to also consider resale. "If you are buying the sort of apartment that is heavily reliant on the student market then not only have you narrowed down your tenant pool but when you sell, your potential market is only another investor, and probably not an owner-occupier."
Likewise, Redwood Group tends to only develop terraced houses or apartments that are at the generous end of the size scale, knowing that they will appeal not just to investors but also to owner-occupiers. For example, a one-bedroom apartment in its new project Circa at Eden measures a generous 60sq m.
Other important factors to buyers and tenants are the quality and size of the kitchens and bathrooms, says marketing manager David Service. Buyers of the group's developments are varied with typical profiles being a semi-retired couple who no longer need a large property or those with out-of-town beach houses; and young first-home-owning couples or singles.
"The apartment market is now well-established in Auckland, and I think that they are proving to be as good as an investment as more traditional properties," says Service.
Project marketing manager for Harcourts Cooper & Co Sheree Wilkins believes there has been undue negative press about small apartments. "There are different people in this world and we all like different things." Often small apartments will fill a particular need at a particular time, for example, as a stepping stone for a young person or couple entering the property market.
She believes that investors will continue to find rental demand for small apartments. Students are an obvious market, and she cites the example of a medical student who might not want the distraction of living in a flatting situation so chooses a studio apartment instead. Out-of-towners who want a city crash pad are another potential buyer market as are parents wanting an apartment for a child starting university.
"I think a nice size for a studio apartment is the size of a hotel room. It's stress-free to live in and very comfortable," says Wilkins.
Recent Bayleys research indicates a growing trend towards apartment buyers being out of Auckland or overseas investors, and a slow move towards more owner-occupiers in the 30-plus age bracket. In 2001/2, 80 percent of buyers were from Auckland, but by 2003 that had fallen to 60 percent.
There is also indication of a more discerning tenant pool who will be looking for more flexible leases. As the research states, good quality, well-located and managed apartments will always rent well, whereas too-small apartments of poor quality and with limited car parking will become increasingly difficult to rent.
It's a profile borne up by one property investor from Dunedin who recently bought three apartments off the plans, all located in upper Symonds St. They vary in size from two-bedroom to studio, and the investor sought rental appraisals before buying. His criteria was firstly quality, location and that the apartment had a car park. Then he crunched the numbers and bought. "What appealed about Auckland is that it will continue to have an inflow of people, even if you took immigration from overseas out of the equation. I figure that there will always be more people than there are houses." Another benefit for this investor is that he is sometimes in Auckland on business so if he were to lease the studio, for example, to a service apartment provider, he could stay in it, or one similar, when he is in town.
Still growing
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