If you are considering any Auckland CBD apartment market purchase there has recently been a comprehensive report specifically on that market.
See the thread at https://www.propertyinvesting.com/forum/topic/20510.html

“Make sure you can survive the downside, and the upside will take care of itself!” Donald Trump

Here is a press release I made in NZ yesterday

Beware of “catching falling knives” in Aucklands CBD apartment market.
By Kieran Trass (Author “Grow Rich with the Property Cycle” Penguin Books 2004)

The stage is set for Auckland’s CBD apartments to fall in value by up to 40% over the next few years.

Great caution must be exercised if you are considering buying into this falling market. If you buy too soon you may suffer from “catching a falling knife” as values continue to fall after your purchase. It is obviously dangerous to catch a knife before it hits the ground and buying into Aucklands CBD apartment market right now is equivalent to catching a falling knife. Auckland’s CBD apartment values are already falling due to a combination of factors including a severe oversupply, dwindling international student numbers, lack of demand from tenants and subsequently plummeting returns. Now may look like a great time to buy into this distressed market as apartments can be bought at prices much lower, than their inflated asking prices, but caution in any distressed market is wise.

There is literally a flood of supply of apartments available to buy or rent which is resulting in a distressed market. The number of apartments in the CBD have nearly doubled from that of just 2 years ago. We have seen an increase to over 12,000 completed apartments in Auckland’s CBD plus another 4,000 are under construction plus another 3,000 are planned to be constructed in the next few years. But there are a large amount of apartments on the market for sale now and, this figure could increase within the next 18 months to more than 5,000 (the equivalent of 25% of Aucklands entire CBD apartment stock).

The current oversupply is having a detrimental affect on the level of achievable rents and sale prices. One example of falling rents is a studio apartment in central Auckland whose owners were originally achieving $350 a week just over a year ago but had to reduce the rent to $200, to secure a tenant for just three months. Studios of around 30sqm which were originally being sold for around $150,000 are now only worth about $100,000, if you are lucky. Local buyers have all but dried up, as increasing local concern about the ever increasing dire state of the apartment market, has become more apparent. Many banks only lend 50% of the purchase price of small apartments and some refuse to lend on them at all. Many large apartment projects are still under construction, accounting for several thousand more apartments yet to hit the market which will continue to impact on achievable rental levels and sale prices.

Many of the apartments were sold off the plans in the last few years whilst being promoted on the strength of the strong influx of international students who needed suitable accommodation. Many more are now being sold to investors overseas who are unaware of the current status of this oversupplied market. There has however been a dramatic reduction in the number of international students choosing to study in New Zealand over the last 2 years. Recent Department of Labour statistics reveal new student levels have dropped from 30,486 in 2003 to just 17,488 in 2005. Many of these students were being accommodated in Aucklands CBD within close proximity of many language schools, several which have since closed. Even more alarming is the large reduction in Chinese student numbers from 14,100 in 2003 to 2,700 in 2005. Many of these students were located in and around Aucklands CBD.

Every day the pool of apartments available to rent is increasing as new apartment buildings are being completed. So seeking tenants amongst a dwindling pool of potential tenants continues to get harder. Some apartment owners are now offering rent holidays or free trips overseas if tenants will sign up for just a 6 month rental term and this is attracting tenants who already live in the CBD occupying older or inferior apartments .

The short term prospects for Auckland’s apartment market look grim as the stage is set for the oversupply of apartments and the undersupply of tenants to continue. Many buyers who purchased off the plans are trying to sell their apartments before completion but to no avail as potential buyers are few and far between at current prices.

“Make sure you can survive the downside, and the upside will take care of itself!” Donald Trump

For articles of interest on NZ like:

The property crash myth
A decade of NZs property market
Aucklands central growth corridors
Why real estate investment is just like building a bridge
The small town syndrome
etc

See http://www.hybridgroup.co.nz
Click on Market Insights and Property Advice
Then click Property Advice Library
Then click Investing in Residential Property

“Make sure you can survive the downside, and the upside will take care of itself!” Donald Trump

My new book about the Property Cycle has just been released in NZ.
It’s called “Grow Rich with the Property Cycle“

It is written from an NZ perspective but is appropriate for the Australian Property Cycle too. Whilst researching this book I considered the Australian, UK, USA and NZ markets and found the same Property Cycle exists in all of these markets.

You can read the 5 star reviews it is getting here http://www.propertytalk.co.nz/modules.php?name=bookstore&file=index&op=moreDetails&bookId=84

Regards
Kieran Trass

“Make sure you can survive the downside, and the upside will take care of itself!” Donald Trump

Chandara

We don’t yet have data available like the home price guide but there will be some more in depth data available via the internet soon.
In the meantime for Median prices try the Real Estate Institute’s website at
http://www.reinz.org.nz/marketfacts/index.htm

It’s pretty average data but about all we have at the moment.

“Make sure you can survive the downside, and the upside will take care of itself!” Donald Trump

Further to my earlier comments re Tokoroa…
If it’s such a great place to invest (and some of the new millionaire property investors in NZ seem to think so…) then why is there a mortgagee sale of 14 Tokoroa properties next week!
If it’s so hot why can’t these properties be sold on the open market? Simple, it’s because there are tons of properties for sale there (many vacant)!

And another word on Huntly… There is a mortgagee sale (via tender) of 53 (YES! FIFTY THREE) houses there at the moment…

Some may think its a good investment but Huntly will not become an outer suburb of Auckland in the next 20 years at least (Theres a lot of land between Auckland and Huntly!)

“Make sure you can survive the downside, and the upside will take care of itself!” Donald Trump

Minimogul,

Your comments about the NZ magazine are sadly misguided.
i.e. “If it wasn’t for Richmastery I don’t think there would be a KPI magazine.”
“from a pathetic 18 page or whatever to 90 plus…”
The KPI (formerly the NZ Property Investor mag) was launched in 1997 primarily to supply the Auckland Property Investors Association with a public voice and INDEPENDENT articles of interest to investors. Its popularity led to it becoming a national magazine. Note I say independent and for several years it maintained it’s independence.
My companies were amongst the first to support it with not only advertising but occassional editorial input too when the editor asked for useful content.

Admittedly it wasn’t the biggest or the glossiest mag around but it certainly was very well respected in the residential property investment industry due to it having genuinely independent material in it.
Shares in the magazine were not publicly made for sale but along came the latest “new kids” on the property investment block from ESC (Richmastery) who saw the opportunity to buy and then use this publication for their own means.

There has been much discussion in an NZ property investment forum already (www.housemouse.co.nz) about the lack of independent content and the fact that many articles in KPI don’t even have the name of the person who wrote them? (many written by Phil and David with their own agenda implied) Often articles are pointed back to associated companies of Richmastery.
Many former advertisers in the mag (including my companies) refuse to advertise in the KPI because of its lack of independence.

Since taking over the magazine they have also used it as a very public forum to “slate” any competitors or those who choose not to align themselves with them i.e. Hanna Brothers, Neil Jenman, and my own company for launching a property cycle clock.
Just check out the article by Neil Jenman called “Kiwi Deceivers Target Aussie Consumers” to see what I mean… http://www.jenman.com/NewsNews1.php?id=98

There is a new mag coming and it is very welcome. In fact so much so that it is endorsed by the very respectible organisation called the NZ Property Investors Federation (which governs 16 Property Investor Associations throughout NZ).
Members of the associations will get the new magazine at discounted prices (not umnlike the former arrangements with KPI – but I am told the new mag will cost members less than KPI)

The new mag due out this month is called “The New Zealand Property Investor” and is published by Tarawera Publishing which publishes 2 niche magazines (NZ Mortgage Mag & NZ Asset) and operates 2 websites Goodreturns.co.nz and Sharechat.co.nz The editor of the new mag is, Bob Dey, a well respected journalist who has written about business and property for the likes of the National Business Review and the NZ Herald for over a decade.

I admit the “odd” article in KPI is of interest but they are few and far between… I look forward to the new mag!

Wow, I knew there was much interest in NZ property from Australia but it sounds like there is about to be a whole lot more.I have a group of companies which have specialised in residential property investors needs since 1996 (including NZ’s 1st Property Investment specialised mortgage broking company).

So Diamond, I had to laugh at this “Talked to BNZ today & they said you can no longer set up loans over the phone since about one month ago. Says all banks are the same & that you can fill out the paper work ealier & email but have to physically go in to bank in NZ to complete it. Does anyone out there know of another way!!”

It’s so funny because it’s so absurd for BNZ to tell you that! We have literally hundreds of offshore clients… And NONE of them have to physically go into the bank! I am not surprised to hear this came from BNZ as they are the ONLY Bank in NZ that refuse to deal with mortgage brokers.. (since just a few months ago when they decided that brokers were too expensive to service).Because BNZ no longer deal through intermediaries I guess they are concerned that they must “meet the customer” for security/potential fraud reasons.

We have access to every Bank except BNZ at http://www.mortgagenet.co.nz

And if you are going to invest in NZ then let me give you some basic advice…

Be wary of small towns… I say this ONLY because I have seen several property cycles in NZ and I know what happens when we are in a property boom. It goes something like this… Big city investors get tempted to invest in small centres when good returns in big cities get harder to achieve due to increased values. This drives up prices in those small centres and drives down returns (as rental growth will not match value growth (i.e. just because more investors invest this doesn’t mean that there is more rental demand!)

I’m not saying don’t invest in small towns, I’m just saying be wary

When the boom is over (and in NZ it typically is short lived i.e. 2 years or so) then rents drop and values in small centres can be decimated!
After all who wants to own a property in a small centre with high vacancy rates.

Don’t be fooled into thinking Huntly will become an outer Auckland suburb… Its 60 km from the outskirts of Auckland! Also some Banks will not lend on Huntly properties due to the mines underneath it! (How about that for re-sale!)

And be wary of those promoting towns like Tokoroa as wise investments!!! Tokoroa was a ghost town in the slump of 1992! I know people who lived there that were buying properties for $5,000 (in 1992 i.e THE BOTTOM OF A PROPERTY SLUMP) and renting them out for $20 / week. Those properties are now apparently worth $50,000 + with rents of @$140/week (in 2003 i.e. NEAR THE TOP OF A PROPERTY BOOM)

Check out the latest NZ press about tokoroas massive job losses and heavy dependence on the forestry industry http://www.nzherald.co.nz/storydisplay.cfm?storyID=3513623&thesection=news&thesubsection=general

There are plenty of “newbie got rich quick” investors who are apparently promoting Tokoroa as a wise investment? GOOD LUCK I say! But those of us that have been around for a whilst know better than to buy in small centres whilst a boom is on!
You don’t have to be too clever to work this one out…

My attitude is to stick to the larger centres. You can still get good returns if you are picky.

Check out some of the opportunities we have placed with investors at http://www.hpc.co.nz/tool_opportunities.php
All of these are in Auckland.

For more details on my group of companies (Hybrid) check out http://www.hpc.co.nz

Regards
Kieran