Buyers purchasing Auckland apartments are typically paying close to $400,000 less than those buying houses, new data shows.
The savings are increasingly leading first home buyers to postpone their dreams of a quarter acre block and join investors in the apartment sector, market watchers say.
Apartment-filled Auckland Central is now the ninth most popular suburb for first home buyers and the most popular for investors, the Valocity data shows.
Auckland apartments are worth about $545,000 compared to an average $935,000 for city homes.
Beyond Auckland, apartments typically go for $345,000 in Christchurch and $325,000 in Hamilton where many new builds are underway.
The port town of Picton has the country's most expensive apartment market with a median value of $855,000. Whanganui is the cheapest at $180,000.
James Wilson, director of valuation at property analysts Valocity, believes that apartments, while popular, were not always suited to first home buyers.
They were either small "shoe boxes" designed as investor rentals or big, luxury pads.
"You haven't really yet got an influx of new builds that hit the sweet spot in the middle - that viable option for first home buyer living," he said.
The property trend coincides with planners trying to direct future growth into highrises and townhouses rather than outwards into sprawling suburbs.
Rules encourage developers to build apartments along train and bus routes in a bid to allow more people to live closer to their workplaces and public transport links.
Wilson expected this to lead to more first home buyer friendly apartments springing up outside the centre of Auckland.
Yet the change wasn't coming easy, with young Kiwis still dreaming of buying their own home.
Martin Dunn, managing director of apartment specialists City Sales, said: "Culturally, apartments are still not what many Kiwis expect to live in."
Banks also tended to look unfavourably on apartments, Dunn said. Young couples could buy a three-bedrom house in Papakura and have a bank lend them 80 per cent of the home's value.
Yet it was rare for banks to lend anything more than 60 per cent of an apartment's value, despite apartments "never being vacant because we get 20 applicants for every rental property", Dunn said.
"It hasn't made it easy for first home buyers to get into the market," he said.
The market slowdown wasn't helping either. Though City Sales' business rebounded last month the number of sales overall dropped by a quarter over the past year.
This was reflected Auckland-wide where apartment sales in July fell 59 per cent compared to a year earlier. National apartment sales were also down 46 per cent year-on-year, according to OneRoof-Valocity.
It meant developers were having a tough time securing funding for new developments.
Dunn estimated only 500 new apartments would hit the Auckland market in the next year, while as many as 50,000 new residents would settle in the city.
In Christchurch, rebuild work after the earthquake had led to a lot of new one-to-two bedroom homes hitting the market and being well received, Valocity's Wilson said.
Harcourts Hamilton salesman Rupert Bain said new build apartments in the Waikato city could generate rents around $550 a week - almost as high as those from most homes.
New build apartment buyers included investors selling old properties because of the cost involved in meeting new Healthy Homes standards, he said.
Younger buyers were also keen on new builds.
"They don't seem to want to do renovations ... [they] just want to walk straight into something as their social lives, careers, hobbies seem to be more important than building some equity through doing up properties," he said.