PHOTO: An apartment in this Ronayne St building sold for $113,000 plus GST. STREETVIEW
According to Scott Dunn, the sales manager at CitySales, their agency has witnessed three consecutive auctions where all properties were successfully sold. In the most recent auction, Auckland apartments changed hands for prices ranging from $57,500 plus GST to $585,000, with four selling for less than $150,000.
Dunn noted that cash-paying buyers were acquiring properties that might have been previously overlooked. He explained, ‘What we are observing is a growing preference for what used to be the most difficult property types to sell during the market peak.’ Leasehold and remedial properties are in high demand, as are small freehold units that are both affordable to purchase and offer attractive rental yields.
In contrast, larger and more upscale apartments, typically bought by owner-occupiers, are facing challenges in this market due to high-interest rates associated with their mortgages. Dunn added, ‘The leaseholds, remedials, and small freeholds are usually purchased with cash, eliminating the need for mortgages. As long as investors see a promising return on their investment, they’re competitive in their bidding. In a recession-style market, cash is king, and this trend certainly supports that notion.’
Leasehold properties come with annual ground rent expenses, often reaching substantial amounts. Remedial properties require repair work for issues like leaks, which can be costly. Banks are often reluctant to lend against these property types.
Dunn believed that the value of smaller freehold apartments would appreciate when the market improved overall. For remedial properties, their value would depend on the progress of the repair process. He also mentioned that these properties were typically unsuitable for first-home buyers.
According to Kelvin Davidson, the chief economist at CoreLogic, cash buyers constitute a significant portion of the Auckland apartment market, accounting for approximately 35% to 40% of all transactions. He noted, ‘Cash buyers are finding attractive opportunities.’ However, he urged buyers to be well-informed, cautioning them about potential high repair costs associated with some of these properties.”