More Auckland apartments needed

Wednesday 18 January 2017

By Miriam Bell

Evidence of apartment building is highly visible around the Super City, with cranes prominent on the skyline and screeds of advertising for flashy developments.

But, over the last few months, several high profile developments have failed – the most recent being the St James Suites project.

At the same time, banks have tightened up on their funding to developers.

Now, one of Auckland’s longest-serving apartment specialists is concerned that the city is facing an undersupply of apartments.

City Sales director Martin Dunn said that claims that thousands of new apartments are coming on to the Auckland market are simply not true.

“Such claims leave us scratching our heads. We know all the developers and all the sites and there are considerably less apartments in the pipeline than the 8,000 figure being touted.”

According to the agency’s December report, 1,493 apartments are being built in 2017, followed by 1,894 in 2018 and just 711 are, at this stage, scheduled to be built in 2019.

Further, the report states that most of these apartments are already sold.

Dunn said this was a serious issue given Auckland’s severe housing shortage and growing population.

“The city needs to be building 14,000 to 15,000 new dwellings year to keep up with demand.

“While apartments are only going to one type of the dwellings built, they have been touted as one of the solutions to the shortage.

“But the amount of new apartment supply needed is just not happening and we are getting far less than we need.”

One major reason for this situation is the banks’ reluctance to fund new apartment developments.

Dunn said the banks are pacifying the “screamers” who think investors are creating escalation instead of providing much needed accommodation.

“There might be more new apartments being built if the banks changed their tune.”

City Sales’ report also shows that while average sales prices for apartments remain strong, they have tapered off in terms of growth.

This was providing the market with some much needed time to catch its breath, Dunn said.

“But the bottom line is that if the banks don’t start funding more new apartment developments, the market will move back into a price climb.

“That would be frustrating as it would further impact on the ability of new buyers to enter a traditionally more affordable section of the housing market.”

However, Dunn remains optimistic about the future of Auckland’s apartment market as he thinks sense will, eventually, prevail for the banks.

He said that, despite some recent suggestions, the Auckland apartment market is never going to see the oversupply that exists in parts of the Melbourne and Sydney apartment markets.

“In Australia, developers have the financial clout and ability to go ahead with developments without pre-sales. But it’s different here.

“It is necessary for the appetite, or demand, to come before the supply, so pre-sales are necessary for developments to go ahead.

“It’s an effective safety valve for our market and means that we don’t see oversupply as happens in Australia.”