State Of The Nation: What’s Happening With Apartments in 2024

Written by Money Empire

February 23, 2024

The market’s up, the market’s down, the market’s shaking it all around; every day, it seems, the headlines tell a different story and it’s hard to know how to find out exactly where things are at right now with property investment in apartments.

What’s the history here?

Apartment living in New Zealand actually began over 100 years ago but the idea of a quarter-acre-paradise with a stand-alone home proved much more appealing to Kiwis and only in the 1990s did inner city living – essentially exchanging a house and garden for an apartment and balcony – really take off in the country’s larger cities with consents reaching their peak in 2022 in Auckland, before starting a decline in the period since then.

Where’s the apartment market at now?

The general slowdown has affected the apartment scene to the point that some whole developments are being put up for sale complete, or in part, before construction has even finished.

This is partly due to soaring prices for materials which have derailed many developers’ strategies, and it also reflects the fact that purchasers are acting slowly and cautiously, with many reluctant to buy off the plans.

While the number of consents issued do indicate that the building of what will be mostly one and two-bedroom apartments will continue for a year or so yet, the outlook after that is far less certain.

Is it necessarily all bad news?

Possibly not, because immigration continues to soar, with the increasing number of new arrivals into New Zealand leading to the highest population growth rate since 1946 – with an extra 126,000 new residents added to our national tally, year-on-year, to December 2023.

Many of these people and their families will be looking for housing and expecting to find the apartments similar to the ones they’ve been accustomed to, back in their own countries. While home ownership is still an overriding Kiwi aspiration, many overseas arrivals are used to – and indeed, count on a tenant culture where the landlord does the work – as long as the rent goes in on time, making life easy and less complicated.

What about rents?

The latest figures from Trade Me property indicate that rents are still on a rising trajectory, increasing for the second month in a row to reach record heights.

Median rents across the country were at $630 per month in January – up 0.8 percent on the previous month, and although supply has improved in many places, the immigration effect means demand for townhouses and apartments is still outstripping the number of properties on offer.

“As net migration is almost at an all-time high more people are coming into the country looking for entry level rentals like apartments and townhouses – especially as they are more prevalent in our city centres. This increase in demand is likely putting pressure on the supply and impacting prices,” says Trade Me’s property sales director, Gavin Lloyd.

Is this a good opportunity for potential apartment property investors?

Quite possibly but only as long as you proceed with caution. The highly anticipated easing of interest rates throughout 2024 is looking uncertain now, with some suggestions floating about that the Reserve Bank may even raise the Official Cash Rate (OCR) as part of ongoing efforts to tackle inflation amidst an unexpectedly solid job market.

Cashed up property investors could certainly take advantage of the continued apartment market lull this move is likely to cause, in order to snap up a bargain with a reasonable expectation that rents will remain on the high side for the time being, therefore ensuring future income.

The new government certainly seems prepared to continue promoting immigration and there are clearly jobs available for newcomers. Post-Covid, many Kiwis are keen to return to previous levels of business growth and success, but have lacked the skilled staff to do so.

Seek advice If you think you might be in the market for an investment apartment – or even one for yourself, there are definitely some interesting ideas to explore, so do give the team at Money Empire a shout and perhaps arrange a coffee with one of our experts. As always, being well-prepared is the key to success and we can offer advice across a wide range of property investment scenarios in New Zealand.

Click here to book your free consult today.

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