Auckland apartment market down 30 per cent in second half of 2017
Auckland’s new apartment market dropped by 30 per cent during the second half of 2017, Colliers International research shows.
Pete Evans, National Director of Residential Project Marketing at Colliers International, says the prolonged election period caused a downturn for the entire Auckland residential market.
“Along with ongoing lending constraints and a continuing slowdown in the residential market, this adversely affected new apartment sales across all locations.”
The average asking price of new apartments is now $1.07 million, the Colliers research survey found.
This is a 3 per cent fall on the average asking price reported in the first half of 2017, a decrease largely attributed to the CBD, where the average asking price decreased from $1.3m to $1.1m in a six month period.
Apartments in the city fringe, in areas such as Epsom and the Eastern Bays, continued to see price growth.
The city fringe is now the highest priced location with an average asking price of $1.35m, up by 6 per cent from the first half of 2017.
Evans says the city fringe is seeing an uplift in the quality of projects entering the market, which is reflected in their price.
“We are seeing a new level of high quality apartments in the city fringe, with larger, better designed and finished apartments targeted at owner occupiers.”
Prices are also up in the suburban market, with apartments in areas such as Albany, Hobsonville and Onehunga now asking an average of $862,000, an increase of 5 per cent on the first half of 2017.
The survey reported on 63 new projects with 5,099 apartments, half of which are selling off the plan, 44 per cent of which are under construction and 6 per cent of which that have recently completed.
Evans says that although the market downturn was intensified by the election, it was to be expected as Auckland had seen such strong growth and is now returning to its traditional cyclical property market.
“It’s typical that after a strong growth period of three years that the market will cool and stabilise, which is what occurred in 2017.
“The market for new apartments peaked in the first half of 2016 and has been decreasing ever since.
“The prolonged election period saw sales fall dramatically in October, November and December, which was extra challenging for developers in a market where lending constraints were restricting many purchasers.”
Evans believes that the second half of 2017 will be the trough of the new apartment market cycle and predicts that sales will pick up in 2018.
“Sales activity will be bolstered by banks being more active in lending, particularly to owner-occupiers of new apartments.
“The number of new projects that enter the market will be less due to feasibility issues for developers, meaning more demand for existing projects.
“The asking price of new apartments will remain stable, as developers look to control build costs by decreasing the size of apartments and projects as a whole.
“The new apartments under construction now that were designed and sold off the plan during the ‘good times’ in 2015 and 2016 will be the biggest and arguably best product in Auckland for some time.”
Colliers International’s survey found almost 18 months of remaining supply, according to sales.
With an average build time of at least two years, Evans believes the new apartment market will remain undersupplied for at least the next three years.
“As the city grows and people continue to embrace urban-living, Auckland needs new apartments in good locations.
“While the unitary plan allows for greater densification, funding for developers and purchasers as well as a severe lack of resource in construction is greatly limiting supply.”