KiwiBuild projects are selling at more than seven times the rate of other new apartment projects in the Auckland market.
That’s according to Colliers’ latest Auckland apartment market report, which surveys active apartment projects at the end of every six-month period.
Pete Evans, National Director of Residential Projects at Colliers says that KiwiBuild projects are starting to get traction with buyers.
“Despite the policy’s negative publicity, our data shows that KiwiBuild apartments are now the success story of the Auckland market.”
The Colliers report surveyed 63 projects, of which five are KiwiBuild.
During the second half of 2019 the KiwiBuild projects achieved an average of 36 sales compared with non-KiwiBuild projects, which averaged just five sales.
Evans says that cost is the central factor, with the lower priced suburban projects accounting for two out of every three sales and KiwiBuild accounting for almost 40 per cent of all new apartment sales.
“The average asking price for new apartments rose significantly in the city fringe to over $1.55m and in the CBD to over $1.4m.
“However, the suburban market only experienced a slight increase to an average of $840,000.”
Evans says that while high build costs make it difficult for developers to control prices, the higher the price, the smaller the market.
“KiwiBuild requires projects to be priced up to $500,000 for one-bedroom homes, $600,000 for two-bedrooms and $650,000 for three-bedrooms in Auckland.
“This pricing is keeping new apartment prices in the suburban market down, with the average asking price under $9,000 per square metre according to our survey.
“KiwiBuild homes are providing value for money for first home buyers who have been very active in acquiring well-located new apartment projects that are near amenity.
NZ Living’s KiwiBuild project Fraser Avenue, located in Northcote, was the best-selling project with 76 unconditional sales at the end of December.
Evans says that they’ve seen a shift in the market for new apartments over the last five years and the buyer profile has changed significantly.
“In 2015 and 2016 when the residential market in Auckland was at its peak, large and luxurious apartments in city fringe locations were popular with owner occupiers.
“Buyers were predominantly empty nesters looking for a lifestyle change, as well as speculators riding on the capital gains to be made through skyrocketing prices.
“The market started to slow-down from mid-2016 but during the second half of 2019 we started to see the start of the next upward cycle, which was driven by the active first home buyer market.
“New apartments are popular with these buyers as they provide an opportunity to get a foot on the property ladder with a new home that’s close to transport and amenity, and in central locations where they probably can’t afford a stand-alone home.
“By implementing the developer underwrite, KiwiBuild has enabled more affordable projects to come to market and provided more opportunities for eligible buyers to purchase.”
Evans says well-priced suburban projects are what the markets wants and predicts they will continue to be in high demand throughout 2020, potentially resulting in an undersupply.
“Based on the current sales rate and the number of units available for purchase, the suburban market is sitting at just 16 months of remaining supply.“This amount of supply is considered to be in undersupply and shows the need for more apartment projects in the affordability price range in the suburbs.”