Unlike their cousins across the ditch, New Zealand property buyers are reluctant to give up their backyard dreams.
But a growing number of developers are moving into the design-led boutique apartment market as the appetite for a more low-maintenance lifestyle grows in the bigger cities.
New Zealand Mortgage Securities director James Kellow said the market was “very niche” in New Zealand compared to Australia’s growing love affair with apartment living but there had never been a better time to be a developer.
“Kiwis prefer the lifestyle of a townhouse, a little bit of grass in the backyard for a dog or kids to play … that’s why you’re seeing so many townhouses springing up [which are] relatively cost-effective to build,” Kellow said.
“Townhouses are built of timber, which is grown in New Zealand, builders are used to this construction method … apartments have a lot more concrete and steel, and require more specialist builders.
“Construction prices are roughly $3000 per sq m for timber versus $4500 per sq m for concrete. Apartments are more popular in areas with extremely high-land values so density of apartments makes sense.”
According to building approvals figures for June, there were 4310 new dwellings approved in New Zealand.
Of that, 2373 were for houses, 1303 for townhouses, and 413 were apartments, while the remainder were retirement village units.
Apartments make up less than 10 per cent of approvals, compared to Australia’s building approval statistics, where in the same period apartments represented up to 34 per cent.
But what it lacks in volume it makes up for in luxury, according to Cooper and Associates director Martin Cooper.
Cooper, who has developed significant Auckland apartment developments including Elm at Remuera and Outlook Mission Bay, believes the sweet spot for apartment living is at the high end of the market, where downsizers are becoming increasingly active.
He said owner-occupiers had increasingly taken over the market over the past five years, which had been heavily dominated by investors.
“Townhouses will always have a part to play in the housing continuum, especially for younger buyers,” Cooper said.
“But increasingly we are seeing people want simplicity and the convenience of apartments, and they want their time back. Well-designed apartments can do that.”
We think about the experience before the building ... what does the site deserve, what would the people living in this location want and what does it mean to them to live there.Martin Cooper
But Cooper said there were also more developers looking to enter the apartment sector after the rezoning of land and the opportunities to capitalise on a red-hot property market.
“We’ve got about seven builders in Auckland who can do big apartment developments … land is a big constraint,” Cooper said.
“Our construction prices are substantially more than in Aussie and with less sophistication in the build partners. It’s probably the toughest part of the development process in New Zealand and often catches out a lot of people.
“The supply of quality land has got better in recent years, but it is still a struggle at times. Like most growing cities, Auckland is struggling with an infrastructure deficit from the past 40-plus years and this can have a constraint on the ability to develop parts of the city.”
Cooper said the $4-billion infrastructure investment in Auckland’s public transport would make density more appealing. He said he believed apartment developments would become more viable in the next few years.
Cooper and Associates is due to launch an ultra-luxury apartment development in the next few months that would “set a new benchmark” for apartment living.
The apartments will be an average of 200sq m with penthouses that will “be an offering not seen in New Zealand to date”.
Luxury townhouse developer Gibbons Co founder Kurt Gibbons said there was an appetite for both apartments and townhouses but for developers a townhouse was a safer bet.
“From a development perspective the cost and risk associated with apartments makes them not as viable to develop as townhouses,” Gibbons said.
“We’ve completed multiple townhouse, apartment and commercial developments. What makes us stand out is the prime locations we manage to secure in Wellington and Auckland.”
Gibbons said site acquisition was key to their projects with “strict criteria” for their design-led affordable townhouse projects.
He said Gibbons Co had about $800 million of project in the pipeline currently across residential and large format retail.
“I have been buying property since I was 18 and slowly progressing through all sectors of the property and building industry … I love that we are now one of New Zealand’s leading developers with innovating developments across New Zealand,” Gibbons said.
Gibbons said materials supply and price increases were heavily impacting the construction of projects across New Zealand, along with land supply.
New Zealand recorded its lowest volume of properties for sale in 14 years and the highest average asking price on record.
New Zealand Human Rights Commission’s chief commissioner Paul Hunt has labelled affordability issues a “failure” as he launched a national inquiry into the issue recently.
The New Zealand government announced a billion-dollar program in March to try to increase supply and cool the market, but prices have not moved.
The national average asking price is now $893,794 and the median house price is about 10 times the median income, while Auckland’s property values sky-rocketed by 32 per cent during the past 12 months.
A Juwai IQ report found Auckland had experienced the third-highest increase in property values globally during the past 12 months.
Kellow said Auckland’s Unitary Plan had helped to unlock land through rezoning to help address the housing affordability issues with higher density.
“With much of the region’s zoning a lot more permissive, and Auckland council now more agreeable and efficient at issuing consents, the risk for both developers and lenders has reduced,” Kellow said.
“We are seeing more density around transport routes and hubs and established town centres—which makes sense.
“We try to support projects that pulldown Auckland’s median house price, not inflate it … many of the developers we partner with sell townhouse product with a price point of around $650,0000 to $850,000.”
Kellow said there was no shortage of buyers in New Zealand, particularly in Auckland, where 60 per cent of most projects sell within a month of release, and that this would further intensify when migration returned.