Exhausted home hunters set sights on apartments not houses.
First-home buyers are giving up on dreams of buying a house in the suburbs and turning their attention to apartments in the central city.
Martin Dunn, of apartment specialist real estate agency City Sales, said there had been a shift in the demographics of apartment buyers.
The proportion of owner-occupiers looking to buy had changed from 30 per cent of the market a couple of years ago to 45 per cent.
His office was seeing a lot of first-home buyers who were unable to contemplate purchasing a $600,000 house in the suburbs.
Auckland's median house price increased by 1.9 per cent in November compared to October, to $540,000.
Barfoot and Thompson reported an average price of $627,721 for the city.
By contrast, freehold, two-bedroom apartments with parking spaces are selling for less than $300,000.
Dunn said first-home buyers' influence in the market was pushing up apartment prices.
City Sales held an auction this week at which seven of the eight properties on offer sold.
One, a studio apartment in Fort St, in downtown Auckland, went for $60,000 more than similar apartments had sold for two years ago.
Real Estate Institute chief executive Helen O'Sullivan said it was logical for first-home buyers to look at apartments. "If your price point is $400,000, you can do quite well in the apartment market."
Dunn said the fact that banks were easing their lending criteria had prompted the increase in activity.
In 2007, 50 per cent equity was required to buy apartments smaller than 50sq m. Today, banks regularly lend 80 per cent of the purchase price of even quite small properties.
Apartment sales are now turning over at a rate of about 140 per month. In 2008, that dropped to a low of 67 a month.
Property Investor magazine publisher Philip Macalister said first-home buyers were snapping up apartments that traditionally would have been popular with investors.
"There seems to be clear evidence that first-home buyers are looking to apartments. That's partly because they're obviously a lot cheaper."
He said they were becoming a viable stepping stone for young couples getting on to the property ladder.
"We're starting to see capital growth in the apartment market. It's traditionally been a market for investors and those looking for yield. Now it's got a bit of capital growth."
He said it was a sensible option for those who could not yet afford to buy a house.
Price rises would likely continue, he said.
"There have been no new apartments built for a while. There's more demand now so that supply/demand imbalance will drive up prices."
Macalister said there were more than 100,000 apartments nationwide. "It's a relatively new part of the market but it's a big one."
Rising prices are reducing the yields for investors but many are still buying apartments.
Auckland Property Investors Association president David Whitburn said that Australian investors were very active in the city's apartment market. "They think anything over 5 per cent is a good gross yield."
Apartments near the beach were particularly attractive to them.
O'Sullivan said many buyers did not understand how body corporates worked, she said.
"You need to be more careful. When you do due diligence on an apartment, you also need to do due diligence on the body corporate."