All Topics / Overseas Deals / Apartments fail to sell – Auckland
Hi Guys
For those of you who have bought apartments in Auckland or are looking at doing so then read on.
Apartments fail to sell21.10.05
By Anne GibsonAuckland’s inner-city apartment prices look to be falling after a failed auction this week left vendors with unsold units and an industry chief astonished at the $3 billion sector’s quick reversal of fortunes.
The bulk auction of inner-city units left agents hugely disappointed with a result that they called appalling.
Martin Dunn, head of apartment realtor City Sales, said only one of the 11 apartments his staff tried to auction on Wednesday had sold and many failed to attract a bid.
Vendors with passed-in units now faced the prospect of discounting prices even further.
“Some of the units are brand new but the vendors are freaked out about the market. They have decided they weren’t very wise to buy and are dumping them for less than what they paid.”
The failed sales follow a decline in Auckland’s rental market. A study by Massey University last month found Auckland one-bedroom unit rents had dropped from $330 a week to $290 a week in the last two years, two-bedrooms from $420 to $372 and all units down from $362 to $340.
But property prices in central Auckland have continued to rise over the same period. The median price for a home – including apartments and houses – in Auckland City was $383,250 last month, up from $330,000 two years earlier, Real Estate Institute figures show.
Units hardest hit in the auction were developed by Robert Holden’s Conrad Properties Two in the new 512-unit Zest apartment block.
“I’m not allowed to say what the reserves are but they are well below what people paid and they still failed to attract a bid, which has got me rather despondent, so we’re telling vendors they will have to accept even less,” Dunn said.
But Holden said demand was still strong. Radio advertising for apartment sales this week had sparked 112 calls to agents and three sales.
However, he acknowledged the market was “competitive” and that one-bedroom units in Zest were going for between $135,000 and $140,000.
“We’re actually finding there’s a lot of demand,” Holden said, adding that auctions were just one sales method.
Dunn said three units in the Heritage building on Hobson St were put up for auction but only one sold; the two-bedroom penthouse unit with basement parking for one vehicle went for $455,000.
Some studio unit sales in the building had showed a 54 per cent drop in value. Units that had been selling for $200,000 were now fetching under $130,000, despite the fact that they generated $300 rent a week and were in a desirable building.
Dunn blamed bad publicity about the market, falling rents and an oversupply of apartments for the situation. “The publicity has sparked a degree of panic which we’re not happy about. I have been saying fortunes will be made and lost in the apartment market in the next few years and, unfortunately, I’m right,” he said. “Now is the time to buy if you want a bargain – not in six months’ time.”
Last night, BNZ chief economist Tony Alexander said the huge over-supply of apartments had been hanging over the Auckland market for two years. He predicted prices would fall in the next 18 months.
Flat out
* Auckland has about 10,800 apartments worth nearly $3 billion.
* At least 18,000 people live in inner-city units but the numbers are ballooning.
* A further 4704 units are going up and will be finished next winter.
At least 5000 more units are being planned, depending on market conditions.
News source
http://www.nzherald.co.nz/section/story.cfm?c_id=3&ObjectID=10351356Regards
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Part of the problem in Auckland is that most of the people investing in the apartments are Australian investors. This may have a two fold effect, when prices start falling and returns keep dropping, who will buy the apartmentsoff the Australian investors. From what I am seeing, most locals will not touch apartments with a ten foot pole. The other effect could be as investors become desperate to obtain tenants the rents will fall and effect other areas of Auckland.
Nigel Kibel
http://www.propertyknowhow.com.au
Australian and New Zealand Property Researcher and education
One Day property investment research workshop just $290 Melb 26 NovemberNigel Kibel | Property Know How
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One last point is that I am still coming across Australians looking to invest in the apartment market. There are marketing companies still pushing this rubbish. One person had been offered a 51 sqm 2 bedroom apartment for around $250,000 and guess what he would recieve a return of $400 per week. What rubbish, I suggested that he burn his money instead. Before you waste your money do your own research. Search and see what properties are selling for in the established market.
Nigel Kibel
http://www.propertyknowhow.com.au
Australian and New Zealand Property Researcher and education
One Day property investment research workshop just $290 Melb 26 NovemberNigel Kibel | Property Know How
http://propertyknowhow.com.au
Email Me | Phone MeWe have just launched a new website join our membership today
Hi Muppet
VERY interesting article. Don’t you love the spin!
Dunn blamed (‘BLAMED’ INSTEAD OF ‘EXPLAINED’) bad publicity about the market, falling rents and an oversupply of apartments for the situation (WELL Mr DUNN THAT JUST ABOUT COVERS EVERY REASON!! THESE ARE INVESTMENTS ONLY FOR OUTER TOWNERS. next headline should be KIWIS USE AUSSIE TRICKY ON AUSSIES!) “The publicity has sparked a degree of panic which we’re not happy about (I’M NOT SURPRISED YOU ARE NOT HAPPY). I have been saying fortunes will be made and lost in the apartment market in the next few years and, unfortunately, I’m right,” he said. “Now is the time to buy if you want a bargain (Sure it is!!) – not in six months’ time.”
Who would you trust:
Real Esate agent orLast night, BNZ chief economist Tony Alexander said the huge over-supply of apartments had been hanging over the Auckland market for two years. He predicted prices would fall in the next 18 months.
That is a great article to summarise this industry. Cheers Muppet made my day [biggrin]
$130K apartments getting $300pw rent?
How many of them can you afford to buy and hold for 20 years! Talk about positive cashflow!
[biggrin][biggrin][biggrin]
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
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0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
None if your vacancy rate is 52 weeks of the year. Seriously I would not touch these without 12-15% gyeild. I lve in freemans bay and walk past these monstroteous every day. Rename as China town, then look at the reduction in overseas students and increased supply and you will see why they advertised in Oz not here.
The Auckland city council should be shot. They are the ugliest buildings and will be slums in no time. Try selling your apt when that happens.
They are investments for those too lazy to look for their own decent stock.
Steve
You have just been to Auckland, (sorry we did not catch up), and must have seen them. What are your thoughts on them as an investment?
Hi Paul
You said:
That is a great article to summarise this industry. Cheers Muppet made my dayThanks for that. Just trying to keep our Australian cousins informed about the play in Auckland.[biggrin]
I know of some Australian investors who have bought between 120 and 140 apartments in Tokoroa.
No comment at this stage.[bonjour]
I don’t think they know of the propertyinvesting or the propertytalk forum sites. If they had they might have had second thoughts. Then of course they might know something that none of us know.I have a friend who is looking at buying an apartment in the Auckland CBD. I hope he will be very careful as to where he will be buying.
Regards
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Well Muppet you know my views of Tokoroa given all the other greta areas in NZ. Apts is that area is just damn right silly!
These are interesting times for sure.
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