Investment Advice, The Aucklander
Thursday December 3, 2009
by Tanya Kwasza
If I mention the word apartments to many of my clients they shy away and are relieved when I recommend a free standing home. Apartments have been perceived as the investment leper!!! Thanks in part to Blue Chip we have witnessed retirees into losing their homes, to the free fall of apartment prices during the recession. It was a mortgagee lolly scramble and those astute enough ran in to pick up the bargains.
However in the midst of this inner city carnage we have lost sight of the value and beauty of apartments. In former times they were exciting and were known as condominiums and penthouses with the associated glamour: not the shoeboxes and Soviet style concrete blocks that we now associate Auckland City with.
In cities like Seattle and London inner city apartments are sought after due to the views, convenience and reduced travel time. Are you aware of the prices of inner city accommodation in the majority of the world’s major cities? Why is Auckland currently so undervalued? Look at Auckland now through an international lens. New Zealand has been voted the country perceived as the least corrupt in the world and Auckland voted one of the best cities in the world to live. Thankfully the government has opened the doors to new migrants who have the capacity for economic stimulation. Yet currently the very heart of the city ringed by the golden suburbs of Parnell, Ponsonby, and Newmarket is being given away.
I think the time is now to pull away the bloodied scaffoldings and look at the future possibilities of apartments. Why have we all been led to believe that there will be no future capital growth in apartments? As a landlord I want a portfolio that is as cash flow positive as possible, with no tenant hassles, no vacancies, low maintenance, high yielding and prospective long term capital growth. The million dollar question: Are there apartments that offer both capital growth and yield?
Investing in apartments is still embryonic in NZ. I believe it is time to view apartments in another light and to grab the opportunity. It is all about location, location, location. Take a freehold apartment with unobstructed sea views, over 50m2, in the Grammar Zone, next to the hospital with up to 30 year leases with an international management company. If they are returning 7.7% returns now, where do you see them in a decade or 30 years time? These specific apartments are the Blue Chip sacrificial lambs, built now to current building specifications, with close to 100% occupancy. These were originally to be sold down for 80 million and now are being sold for almost half of that.
No new developer can come in and build again for these prices. We have a burgeoning population, a predicted 7% rental accommodation shortage in the CBD in 2011, World Cup rugby coming and increased global interest in New Zealand.
Contact me for an information pack. We will present to you global facts and trends that will make it clear that we may have overlooked the future wealth of high rises that will once again stand tall!
