As Auckland house prices become increasingly unaffordable, apartments are often cited as a realistic entry point for first-home buyers.
On the face of it that would seem to be a sensible idea as, surely apartments are cheaper than houses?
Based on the average value of the entire stock, the suburb of Auckland Central, comprised entirely of apartments, is worth $441,500. That's less than a quarter the average value of nearby Remuera ($1.8 million), which is almost exclusively houses.
So in terms of affordability, there's no doubt it's a more palatable option for those wanting to be close to town.
You also get the potential added benefits of shared services such as gyms and pools in the complex and probably don't need a car for day-to-day living.
But according to our buyer classification series, back in 2005 to 2007 first-home buyers were picking up around 30 per cent of all apartment sales in Auckland when the value was $260,000-$280,000. Then, during the GFC the banks dramatically tightened the lending rules on apartments and in most cases a first-home buyer would need a 30 per cent deposit. By 2009, first-home buyers accounted for only 15 per cent of sales and over the past two years, it is barely above 10 per cent .
Meanwhile, investors picked up the pieces when first-home buyers dropped out of the market and by early 2014 accounted for 58 per cent of all apartment sales and are at that level now. The other active group is movers, who make up around 20 per cent of apartment sales.
This is mostly people downsizing.
Why then, do more young home hunters not seem to see apartment buying as a viable option?
It would seem the number of potential fish hooks when buying apartments keeps many away. If an apartment is leasehold then the terms of the ground rent need to be carefully considered.
Corporate body fees can also add up fast and if money hasn't been regularly put aside for a rainy day then an unexpected maintenance cost, such as the discovery of a leak or the need to fix a roof may cost each apartment owner tens if not hundreds of thousands of dollars.
For Auckland to really mature as an international city, apartment/unit living needs to become more of the norm -- crossing the ditch we see Sydney's residential property market has 28 per cent of the stock as apartments, whereas in Auckland it's only 7 per cent.
So there's a long way to go and with many young buyers still holding on to the (expensive) dream of a house in the suburbs with a back yard, it's hard to see it changing in a hurry.