Auckland’s apartment market has declined sharply, with some projects abandoned partway through and an 83 per cent pre-sale drop in the last six years.
Tamba Carleton of CBRE prepared a chart which showed the recent peak in apartment pre-sales was back in 2016, when more than 3000 units across the city were pre-sold. She is an associate director within CBRE’s New Zealand research department, specialising in high-density residential research with a focus on the apartment market.
She said 2016′s 3000 new Auckland apartment pre-sales fell 83 per cent to just 500 Auckland apartment pre-sales last year.
And the situation is not improving.
High interest rates and the recession are driving down the numbers, as developers plan fewer new units due to indications they won’t be able to sell those off the plans. They need those off-the-plan deposits as one of the funding mechanisms to build. Usually, pre-sales and either mainstream bank or non-bank lending funds construction and apartment project completion.
“Low pre-sales, low launches alongside abandonments and completions are all interrelated, overlaid with changing household structures and priorities,” she said.
“Launches have been low for a while now, and lately, the supply pipeline has been getting smaller and smaller. I am expecting fewer than 1500 apartments to be completed in 2025,” she said, referring to projects which are under construction now or about to start.
The Government’s gazette notices are filled daily with liquidations of builders and subcontractors, in growing numbers.
Kāinga Ora, the housing arm of the Government, is an extremely active developer building large new apartment blocks in suburban Auckland areas.
John Love is now marketing the last of the apartments in his luxury office conversion The CAB on Aotea Square. When the Herald visited there last month, only 23 out of 114 units remained to be sold, and Love expressed satisfaction with the finished places and progress in sales.
Importantly, the two top floors where the big prices have been put on the penthouse and sub-penthouse places remain unsold.
Two sub-penthouses on level 17, both 258 square metres, are each for sale for $6.5 million, and the entire level 18 at the top is asking $16.5m for unrivalled luxury, including a central courtyard open to the elements - a heritage feature he had to retain to win consent to do the massive conversion.
Love is confident he will sell the remaining places: “We knew this would sell when it was finished.”
On projects being abandoned partway through construction, Carleton said she could not name any. These were confidential.
But the Herald has reported how the big new Onehunga apartment building Beachcroft was abandoned partway through construction. Last month, OneRoof reported the partly-built $85m block was going to be ‘saved’ by Roger Coulson.
Coulson, the former CEO of property development and investment company Starline, said construction on the six-level Beachcroft Residences would recommence, with a target completion date of December 2024.
Coulson’s ownership of the 85-unit apartment block is backed by wealth management fund Alvarium.
Ockham Residential is having a record run, with its boss Mark Todd saying this month the business would soon finish nearly 500 new apartments this year, including Aalto, which officially opened on Monday this week.
Todd acknowledged the market had changed since 2021, when every Aalto unit in Morningside sold off the plans in just a month. He acknowledge dthe housing downturn and higher interest rates, but said the company had now successfully finished the building, developed on a tight site of just 800sq m, where one house once stood, but now the land is now zoned for terraced housing and apartments, earmarking it for upscaling.
Aalto is Ockham’s 17th development. Soon it will finish Ponsonby’s The Greenhouse with thousands of distinctive bricks on the Pollen St/Williamson Ave intersection across from Stuff and Vinegar Lane.
Out at 9 Jordan Ave, Onehunga, more than 200 units are being built at Manaaki.
Todd said Ockham would finish close to 500 new Auckland apartments this year alone.
Carleton explained more about how she defines abandonment, but could not say if Beachcroft was in her list.
“My definition of abandonment has a high threshold. The tipping point from pipeline to abandoned will be something along the lines of the buyers getting their deposits returned, or the project site being sold. If a project completion is delayed slightly for whatever reason, then I don’t tend to put it as abandoned because then the size of the pipeline will flip-flop a lot. I try to have projected supply as accurately as possible. It’s constantly changing, though,” she said.
In this year’s second quarter from March to June 2023, she found the number of saleable Auckland projects planned was 61 new projects. The last time there were 61 saleable projects in the pipeline was in 2014′s final quarter.
So far this year, developers have completed 744 new Auckland apartment units, and a further 2898 are expected to be finished by the end of the year.
“I’m sure there are more than 700 new apartments in Auckland finished now. I’d estimate there are 1000 new units completed now and in the second half of this year, around 2500 new units are estimated to be completed in Auckland.”
“On the sharp turnaround, pre-sales peaked in 2016 when the CBD was really active with new apartment projects. Around 30 new apartment projects were rising in that area around 2016. Now, there’s only two. So the CBD has not seen a major new apartment launch for many years,” Carleton said.
The Herald has reported on the new Seascape apartment building on Customs St East and 51 Albert, partly a hotel but with luxury apartments at the top. The Albert St tower is to be a 41-level $250 million project.
Those are understood to be the only two inner-city apartment projects now under construction.
Winton Land has launched its new Northbrook Wynyard Quarter luxury retirement village offering, marketing that in the Herald and a new $4m sales suite. But that isn’t apartments because of its end use as retirement units. The $750m scheme for Auckland CBD’s first vertical retirement village will result in refurbishing and rebuilding on a 1.7-hectare site. A 604sq m penthouse with four bedrooms and 3.5 bathrooms is for sale from $13.75m.
Carleton said apartment demand from buyers was still strong.
“Auckland’s changing. We will continue to have more apartments. Pre-sales are low because launches are low. Unsold stock has gone down and there’s very little to buy. There’s been a change in sentiment with the investors coming back. Investors can’t deduct interest on existing rental property, but they can on new builds.
“Also, there are a couple of very nice apartments for owner/occupiers launched in June,” she said, but confidentiality means she cannot name them.
Demand was still high in certain locations, Carleton said. “That weight of demand will drive new launches in future. We’re in a wider housing market downturn which is affecting certainty of the future.”
The Pompallier is a new Ponsonby apartment project where construction is yet to start. In 2021, the Herald reported on that planned $120m office/retail/residential development, where architecturally designed apartments could go for more than $10m each. Kelly McEwan, development director of Urban Collective, said the project was planned for a corner site at 286-304 Ponsonby Rd.
At Takapuna, work is continuing apace at Amaia, the new apartment building on Esmonde Rd near the motorway approach. Developers there are considering constructing 15 buildings up to 16 levels, with architects comparing the scheme to the profile of a famous French island.
KBS Capital, owned by Brilliant Stone, is developing the ex-church site, which straddles a thin strip between the Waitematā and 48 Esmonde Rd on the main exit and entrance to the Auckland Harbour Bridge.
Master planning for the 15-building scheme is indicative only and the buildings are yet to be designed fully, KBS says.
Jasmax likened the higher building form in the centre of 15 new buildings as being akin to the much-loved Mont-Saint-Michel in its planned built appearance.
Across in Parnell, a $60m project is rising: 1 Saint Stephens on St Stephens Ave beside the Anglican cathedral.
Developer Martin Cooper said work was undertaken with luxury car dealer Giltrap’s to design the gradients to basement parking areas to ensure sports cars were accommodated in his plans. Giltrap’s award-winning $40m 119 GNR building on Great North Rd has the same ramps, also designed for luxury vehicles.
So that block is designed for wealthy people with low-slung high-performance cars.
The Parnell project aims to be New Zealand’s most luxurious new apartment building. Cooper is developing it with Mike Sullivan’s Countrywide Residences. Last August, 12 apartments pre-sold off the plans for an average of $5m each.
The Herald has heard from some apartment developers who have laid off staff, are slashing workloads, abandoning plans for new blocks, not buying land or commissioning architectural designs and not employing contractors who worked for them for many years.
But the developers doing that have asked not to be named. They don’t want other staff to worry about their jobs, nor for the wider sector to know that a huge change is silently taking place due to a lack of confidence in the marketplace.
Anne Gibson has been the Herald’s property editor for 23 years, has won many awards, written books and covered property extensively here and overseas.
House prices will be 20% lower in real terms by the mid-2030s than in 2021.