Apartment plight price is right

A studio in this leaky building sold for $38,000.

A studio in this leaky building sold for $38,000.

The dramatic slump in the price of investment apartments is now spreading to the owner-occupied market as well, providing an affordable alternative for first-home buyers.

The fall in the value of investment apartments has been well documented, with many selling for tens of thousands of dollars less than they were purchased for a few years ago, when the market was booming.

However, there are increasing signs that prices of apartments built for owner occupiers are also falling, significantly increasing their affordability.

An auction held after Easter by Auckland apartment specialists City Sales was unusual, because it included a mix of investment and owner-occupier properties, which were put under the hammer.

It was easy to spot the difference. The investment apartments were small, several falling into the shoebox category, and provided basic amenities.

Those suitable for owner occupiers were more spacious, had higher standards of finish and often had excellent views.

The biggest apartment had two bedrooms and just over 80sqm of floor space on level eight of the Regatta Court building on the Nelson St ridge. It was well appointed, but its most attractive feature was city and harbour views, taking in Victoria Park, Westhaven and the Harbour Bridge. It came with a car park and was being sold fully furnished.

Quotable Value records show it was purchased for $420,000 in 2003, but at the auction it sold for $310,000.

Next up was a two-bedroom apartment in a high stud, character building down the road from the University of Auckland, with frontages on to both Emily Place and Anzac Ave. It had a floor area of 78sqm, plus a deck.

This had been purchased for $265,000 in 2005 and attracted intense competition from several bidders, before selling for $259,000.

The smallest apartment suitable for owner-occupation had one bedroom and floor space of more than 50sqm, with excellent views over Grafton Valley to Rangitoto Island and the Hauraki Gulf. This was purchased for $235,000 in 2003, but was passed in with a top bid of $219,000.

City Sales director Martin Dunn said a feature of the owner-occupier market over the last six months had been the entry of a new wave of buyers. Generally these were first-home buyers aged 25 to 30. Falling prices had made apartments a much more attractive option than buying a house, and they could often afford to buy in to a better quality building with good views, something that would be well beyond their means in the suburbs.

“They just weigh up what sort of house they can get for their money and what sort of apartment and it’s a no brainer,” Dunn said.

However, the biggest bargains are still the investment properties. The lowest price achieved at the City Sales auction was for a fully furnished, studio apartment in a leaky building, which sold for $38,000, compared with its rating valuation of $125,000.

At just 21sqm it was definitely a shoebox and the new owner could be faced with significant costs for remedial work.

On the plus side, it was on a freehold title near the Viaduct precinct and was rented out at $210 a week, the new owner receiving an initial yield of 26.5% on his investment.

By GREG NINNESS – Sunday Star Times