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High demand for inner city quality living quarters

14 January 2014. Source: Fairfax NZ News

By this time next year, there will be dozens more apartments in Wellington's pool. Although the apartment market in the CBD is soon to become more crowded, there remains strong demand for quality inner city living.

The Elevate apartment block is due for completion in March, with about 80 residences in it, priced from $337,000. Property company Willis Bond's One Market Lane has 40 apartments ranged from $650,000 to almost $2 million, due to be finished in the fourth quarter of 2014. Tory St development Appartamento Il Casino, with 33 apartments from around $400,000 up to almost $2m, is almost finished.

Luxury development Clyde Quay Wharf, another Willis Bond complex, is due to be completed in the first half of 2014. It has 77 apartments, almost all of which have already sold off the plans. Less than eight, priced from $1.4m, remain for sale.

Tommy's real estate sales person Bill Mathieson said new stock that will be occupied this time next year won't change much about Wellington's apartment market.

"If you're thinking there's going to be a glut of apartments on the market, I wouldn't think so. If anything it may have an effect on the housing market.

"With a lot of those properties like One Market Lane, Clyde Quay Wharf and to a lesser extent Il Casino, many of the people moving into those will already be in houses and those houses will be reasonably good quality so they will start to sell those down."

There is huge variation in prices of apartments depending on quality and specifications. Studio apartments tend to rent for about $250 while one bedrooms go for around $320-$380. Two-bedroom apartments in Wellington's CBD currently listed on TradeMe range in price from $250,000 to more than $600,000.

A furnished one bedroom apartment on The Terrace with only one external window is asking $220,000 while a one-bedroom in Taranaki St's Bellagio Ataahua complex is seeking inquiries above $335,000. A two-level one-bedroom apartment in Wigan St's Tattoo building, one of only three residences in the complex, is up for sale. With double glazing, sunlight and earthquake code compliance, the seller is asking more than $20,000 above its $315,000 RV.

Some investment apartments leased to accommodation providers are for sale. A 28 square metre apartment in the Rydges hotel - too small for the minimum 50sq m requirement most banks restrict lending for - is asking upwards of $190,000. A 49sq m unit leased to Quest is asking $160,000 plus GST for a studio, claiming returns would be $11,000 a year.

In Auckland there are about 24,000 apartments, many of them small "shoeboxes" rented to students, short term accommodation providers and out of towners after an inner city crash pad, were almost entirely owned by investors. In Wellington, however, most apartments are owner-occupied.

A 42sq m studio apartment in central Auckland's Heritage complex went for $200,000. Most tenancies in the building were with business people who had signed on for six months to two years.

A 34sq m two bedroom apartment also sold recently at the top of Auckland's Queen St for $175,000. That's tiny, especially for two bedrooms. Instead of shoebox think match box. As well as a kitchenette, it would have a loungette and bedroomettes. But its location on the edge of the city's tertiary education precinct and just around the corner from the bohemian delights of Karangahape Rd, would appeal to students and young workers wanting inner-city digs.

According to Mathieson, one of the big differences between the Auckland and Wellington markets was the capital's compact layout.

"Wellington is perfectly designed for apartment living with only one centre and everything is accessible from that centre whether that is sports fields, the beach, supermarkets, the central business district, shopping. It's all here. Auckland is a bit more spread out and a lot of people desire to live in Wellington because of that so most of the apartments that have been built here over the years are not just little shoeboxes but more designed for long-term living."

He said that while we were not in a "fevered" market by any stretch of the imagination, quality, well priced apartments would sell.

Property management company Quinovic's principal Stephen Dacombe-Bird said the higher priced apartments currently under construction were unlikely to effect the rental market because they were more likely to be owner-occupied properties, not investments.

"The most telling experience we've had is when [Taranaki St apartment complex] Soho came on stream in 2010. What happened in the lead up to that is that in the weeks before, maybe six weeks beforehand everyone just stopped looking for rentals because they were waiting to see the new stuff that was soon to become available. Once it opened, everyone had a look, then the market headed off with a flurry again."

Some of the more desperate landlords who were trying to get tenants for CBD and city fringe properties had to drop rents to get tenants in, Dacombe-Bird said, but that was always the power of attraction for something new on the market taking people away from other available apartments.

"It's just what you would expect, it's normal behaviour - if they can get something brand new for the same price as something eight years old, they're probably going to go for the new stuff," Dacombe-Bird said.

"Earthquake issue is another one on topic this year, newer buildings perceived to be safer and people like that they have double glazing and all the mod cons. In other parts of the market, some properties I think just don't get let anymore if they don't have the things tenants want like heatpumps, insulation, dishwashers. Five years ago you'd just let it at a lower price now they just don't let because there is enough available at a reasonable standard - people can afford to be a bit choosy."

Remax agent Nicholas Reeve has been selling apartments in Wellington for decades. He marketed the Odlin's Building apartments award winning architect Ian Athfield designed when they first hit the market - the apartments are still popular, one is for sale at more than $2m.

He agreed with Dacombe-Bird that people wanted quality from apartments, especially at the upper end of the market. A good location, good construction standards, very good standards of insulation, light, double glazing, with a decent sized balcony so they can sit out there and have a BBQ were all important.

He has recently been marketing Clyde Quay Wharf residences.

"Demand for those was strong but to be fair [Willis Bond] is one company which is easily the leader as far as apartments go with the best reputation in town and many people who purchase in their developments do so based on their reputation and their delivery.

"The name is the gold standard as far as apartments go. They raised the bar and that proved to be the correct thing to do because people are happy to pay the price if they're getting location and quality."

With a location on a finger wharf right next to the city and unobstructed sea views, the apartments were unique.

"I don't want to say they're guaranteed to keep their value but if anything is likely to appreciate in value it would be something like that, because it cannot be repeated."

Quality apartments, he said, would always find buyers.

"I remember 25 years ago there was a report done on apartments and I was asked to contribute along with valuers etc. Every single one of them said they figured they'd reach saturation point but I was incredibly bullish about the point inner city living was going to continue. It has, it's exploded.

"Because there are so many people living in the city now it's made the city far more vibrant and interesting and that's only going to be enhanced as the years go by."