News & Market Update from Roy Richardson
Experienced New Zealand residential property investor Roy Richardson is the founder of Location Group and has spent more than 40 years investing in the market. Here he shares some of his insights for investors considering purchasing an apartment in the New Zealand market.
The New Zealand apartment market is relatively young. The scale, quality and diversity in apartment styles on offer in the country has previously been limited to smaller short-term accommodation or rental options. The apartment lifestyle as a long-term accommodation option for owner occupiers has only really become an acceptable form of housing in the past decade. As such, historically wealthier New Zealanders have seen very little reason to part with their family home.
Now, as apartment living becomes increasingly accepted and the benefits of its lifestyle appreciated, New Zealand’s apartment market has started to mature, particularly in Auckland. However, despite the increase in demand for such product, the market has been slow to respond and the undersupply of owner occupier stock is expected to underpin future capital growth, particularly in the $1million to $2.5million price bracket where the pool of buyers is largest.
Following the successful launch of our residential division Reside’s Horizon Mission Bay project, we’ve seen first-hand the demand from mature buyers to stay within close proximity of their former family homes. Retaining ties with their existing community, services and friendship circles is a major consideration for these buyers. It’s also clear the ideal price point is approximately 70 per cent of the average selling price of existing homes in that area. Not only does this cover the purchase price but it releases capital for retirement.
Through Reside, Location Group has deliberately focussed on boutique owner-occupier buildings in key locations with high quality amenities. Through these projects, Horizon Mission Bay and Grace Victoria Quarter, we’re filling a niche in the market for thoughtfully-designed and liveable apartments.
By focussing on the needs of owner occupiers, we’ve provided them with a lifestyle that includes house-like proportions, a quality, low maintenance environment and private car parking that residents take immense pride in.
New Zealand’s history of delivering apartments that are predominantly owned by investors or offshore buyers has, in general, led to the projection of higher-than-average rental yields initially, but we know these short-term promises fail to deliver in the long run.
The success of any investment must take into consideration the whole package, including quality of construction, amenities, landscaping, property management and long-term capital gains. These are essential factors for any investment whether the goal is capital appreciation on resale, or attracting the highest quality of tenant.
High quality properties always instill a sense of pride among owners and occupants and they’re typically purchased by passionate and discerning buyers. We also know that premium buildings maintain a higher standard of property management, generate stronger rental returns and ultimately deliver enhanced long term capital appreciation relative to investment driven product.
It’s an area of the market Location Group, through Reside, will continue to work in, delivering premium apartment product to appreciative owner occupiers and investors in key New Zealand locations.