Lock up and leave

Stylish city apartments are attracting more and more empty-nesters with big money to spend. By VICKI HOLDER.

In the last three months, the appetite for city apartments has changed dramatically as many older people with cash in hand seek a new style of living.

Martin Dunn, of City Sales, has never encountered so many people looking for spacious, quality homes of at least 200sq m, for which they're willing to pay upwards of $700,000.

"This has really given us a boost," says Dunn. "It's most unusual to have activity right up there. Our average sale for the office is around $235,000 in the city."

He says the 50-year-old-plus market is showing huge interest in city living, partly because the culture of the city has become so much more interesting.

"These people have sold their little house in Glendowie worth $1 million. They are now able to go out and buy something big and expensive in the city. The residential lift has empowered them to go and spend more money."

These older, more affluent buyers like the low-maintenance, convenience, privacy and security aspects of apartment living. And if they can afford it, they also want views.

Dunn adds the modest increase in ground rents at the Viaduct has surprised him. "We thought that it would go up massively but it only went up by 40 per cent. That has taken the uncertainty out of investing in an apartment. The apartment market is actually firming in value at the moment."

Dunn says there is still not enough stock to fulfil demand for larger apartments in the city. Because there is not enough to go around, he has been forced to send many of his clients to look in Remuera and Newmarket.

Nicola Bull, of Kellands, believes the market has now come of age. "Early on the smaller apartments were popular because of their pricing and rental returns for investment purposes. The market now wants larger, more liveable apartments, which reflect the need by purchasers and tenants.

"No longer are apartments seen as a bolt-hole in the city to be used a few nights a week or as crash pads as an interim measure. Purchasers and tenants now both want spaces which they can enjoy and use as permanent living accommodation."

Bull refers to Wilkinson Property Group's hugely successful Guardian Apartments in Queen St, which sold quickly. Wilkinson is now developing the QVB apartments on the corner of Victoria and Queen Sts, which are selling particularly well to overseas investors.

"They reflect the changing needs of apartment buyers for more spacious apartments, high studs, generous windows and quality finishes."

Gerard McClelland, of Symphony Group, says developers are led "totally by the nose" when it comes to deciding what kind of apartments to build. "There's definitely a trend towards larger units with two bedrooms, and 70sq m to 100sq m plus. They're not just a bolt-hole. People start to realise it gets a little claustrophobic any smaller. Even the Australian investors are wanting larger apartments. There's a worry about over-supply of the smaller product."

Take a look at the Sydney model and you can see where the mind-set is headed, says Bayleys' Rachel Dovey. "People are enjoying large apartments with many city benefits. There's a real lifestyle there now. A couple of years down the track, we'll see a lot more like it. Many people want to live in the city. It's a matter of finding the right apartment."

According to Barfoot & Thompson's Virgil Roberts, there has undoubtedly been a coming of age. "But the larger apartments are more for owner occupants looking for a higher standard altogether."

He says what has actually happened in the last 10 years is a change of thinking. "The market has balanced out. There's something for everyone," he says. There's still around 70 per cent of the market who are investors and not everyone is looking for a higher standard, he adds.

"If the apartment is an investment then people need to get a good return, which rules out spending too much money. Occupants of rental apartments are not expecting such a high standard for something they will be in for a short time."

Roberts says small apartments are selling well, but many buyers are from offshore - Australia, the UK, eastern Europe and Russia. "They're buying because they still perceive our apartments as incredibly well-priced compared to elsewhere, and perhaps they are attuned to a longer-term real estate cycle."

He says rental yields for small apartments in New Zealand are nearly double what they are in Sydney or Melbourne. "While the local market doesn't realise it, you compare it to offshore product for the price and yields are considerably stronger."

Foreigners still appreciate what they can get for their money here, but he admits there has been a slow-down in smaller apartments. He says the greatest demand is for slightly bigger apartments at around $400,000.

"It's a question of where the supply will eventuate, because it's a tricky product to provide. The cost of producing an apartment to meet that market is relatively high. You still have to have reserve contributions [in certain locations] whether it's a 30sq m or 100sq m apartment."