The number of lower-end apartment developments is rising. Photo / NZME.
The number of lower-end apartment developments is rising. Photo / NZME.
Property experts say overpriced, low-quality housing sprouting up in Auckland could spark a crash.
An over-supply of low-quality CBD apartments risks sparking a crash that could see prices plunge, an expert says, while another agency is warning of an Auckland "apartment bubble".
Apartment Specialists managing director Andrew Murray told the Herald the number of lower-end apartment developments had surged as developers looked to cash in on Auckland's buoyant housing market.
While quality builds would hold their value, lower quality developments were in danger of bottoming out in a downturn, as they did in 2007 when prices slumped up to 40 per cent.
Buyers who could not afford to raise 20 per cent deposits were often forced to purchase "off the plans", which they could do with only 10 per cent deposit, increasing demand for more new apartments.
But many developers were marketing most of their stock to offshore investors, with owner-occupiers now making up only about 40 per cent of the CBD apartment market, Mr Murray said.
Around 90 per cent of a central city apartment building under construction had been sold to foreign investors.
"They're all being sold offshore. They're all going to be rentals.
"The quality of the units being built at the moment by some developers in the CBD is not high enough. It's a joke and these things are all going to crash because they're selling them for so much."
He said a 41sq m CBD apartment with no car park was currently selling off the plans for $637,000. "That is not sustainable, not even in Sydney."
The average Auckland home is now worth $828,502, according to latest QV figures, and Prime Minister John Key has told house hunters to consider apartments as a lower cost first home alternative.
Property Institute chief executive Ashley Church warned that moves to cool Auckland house price inflation could have "unintended consequences" for the apartment market.
A Reserve Bank discussion paper released this year suggested it was investigating "loan-to-income restrictions" which could cap the amount someone borrowed to a percentage of their income, he said.
Meanwhile, the Weekend Herald revealed that several major banks are considering dropping minimum deposit thresholds for apartments from 20 to 15 per cent to help first home buyers on to the property ladder.
Mr Church warned: "If you close one door and make going through another more attractive, the result is going to be pretty obvious."
Yesterday on TV One's Q+A, Building and Housing Minister Nick Smith said Auckland house prices had risen too quickly. But he was cautious about measures like income caps as his "key agenda" was to reverse the decline in home ownership.
Slice of Herne Bay, with a man cave
The house has been owned by the same family for 50 years.
It's been well loved, with its 1960s interior, retro pink bathroom and what is arguably the greatest man cave ever assembled under a house.
But this humble three-bedroom brick and tile home, which has been in the same family's ownership for half a century, sits in the country's most exclusive post code and is valued at $2.3 million.
The house has been owned by the same family for 50 years.
Situated at 30 West End Rd in Herne Bay, the three-level one-bathroom 290sq m house is nothing special to look at from the outside. Its interior boasts original formica kitchen, lino floor and wallpaper verging on the psychedelic.
Beneath the living quarters is a huge workroom space. The house has space to park three cars, a huge 1854sq m sloping section with subdivision potential and views over Cox's Bay Park.
It was due to be auctioned yesterday but with no registered bidders it would now be sold by negotiation, Custom Residential marketing agent John Wills said.
Herne Bay has become the country's first $2 million suburb, based on average house value. The property's listed owner is Susan Shoebridge, according to Quotable Value.
The house has been owned by the same family for 50 years.
