Rents for apartments in Auckland's CBD have fully recovered from the effects of Covid disruptions and now appear to be stabilising.
The latest bond data from Tenancy Services shows that the median rent for newly tenanted, two bedroom apartments in Auckland's CBD was $575 a week in November last year, while the median rent for one bedroom apartments was $450.
That was an increase of $65 a week (13%) for two bedroom apartments compared to November 2022 and $60 a week (12%) for one bedroom apartments for the same period.
However part of the reason for the steep increase in rents is that the CBD market has been recovering from the effects of Covid lockdowns, which severely disrupted the flow of overseas students into this country, which saw vacancy rates in the CBD soar, which in turn pushed down rents.
The median rent for two bedroom apartments in Auckland's CBD bottomed out at $470 a week in June 2021 while rents for one bedroom apartments bottomed out at $365 a week in May 2022.
Rents have been steadily increasing for the last 18 months as overseas students and foreign workers have returned and vacancy rates have declined.
There are also signs that rents may have peaked for the time being and may be settling around current levels.
The median rent for one bedroom apartments in Auckland's CBD peaked at $470 a week in July last year and remained on $450 a week for three consecutive months from September to November.
The median rent for two bedroom apartments peaked at $615 a week in September last year, then declined to $590 in October and $575 in November.
However a small seasonal decline in rents towards the end of the year is not unusual, as many overseas students and workers vacate their flats to return to their homelands for the Christmas break.
The next big test for Auckland's CBD apartment market will be over the first three months of this year, when demand for apartments peaks following the return of students for the start of the academic year.
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11 Comments
Yup. For those that bought a few when destressed sellers were exiting during covid the yields are good now. And when new building slows down further, exit prices will be even better than now. And thanks to the NACTF many can exit earlier.
Yup. For those that bought a few when destressed sellers were exiting during covid the yields are good now.
If the yields are up around 8-9%, they might be breaking even. Good for money laundering. Not so great for the suburban 'investors.'
I was referring to yield after breaking even.
Wouldn’t touch them with a bargepole. Build quality issues, nasty leaseholds, or both. And a market that can be so volatile with an external shock (eg. Covid). Also throw in the presence of significant numbers of homeless people.
The universities have built a stackload of student accommodation recently so I suspect the return of students won’t impact as much as it used to.
Such prejudice! LOL.
Apartments are bought by investors for yield. Not capital gain that comes with the land in a more traditional Auckland environment. (Although capital gain can be good too as the not so good apartments disguise the good apartments in the average prices that get quoted.). Apartment investors know which buildings are good ones. And they use mathematics (shock, horror!) to work out the yield on leaseholds, that thanks to prejudices like yours, can be exceptionally good. Many parts of London & NY are leasehold, and having lived and invested in both places, I'm familiar with valuing apartments. And because they're generally cheaper they're great for spreading risk too.
Take another look maybe?
‘Apartment investors know which buildings are good ones’ - I know several who got burnt badly.
Yield? Sure, but regardless of yield hardly a good investment if value was to plummet, as it has often done with leasehold properties in Auckland, shonky buildings etc.
London and NYC? Sure, but they aren’t Auckland ( and btw London has had some big problems with leasehold).
Not saying that a central Auckland apartment can’t possibly ever be a good investment, but generally speaking there are lots of issues.
Another demonstration that costs don't determine rent. It's demand -and supply.
If the day comes and a flat advertised for rent gets no inquires at all. The asking price will go down. No matter what the landlord costs are.
Yay, then all existing rents will drop too me wishes.
It would be useful to see what the median sales prices is for one bedroomed apartment in the CBD in the last year were. Would give an idea what the gross return is likely to be.
What's the replacement cost? $15k per square?
Now that Australia and Canada have severely limited the number of international students they are taking this year, there will be an even greater flood of "students" into NZ as they seek the easiest path to getting permanent residency visas.
Buckle up.
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