Snapshot: Residential Development Outlook
Nov 1, 2016
The landscape is changing in the Auckland apartment development market. A summary of these changes are as follows:
The pressure has increased on developers as more apartment development projects are predicted to fall over
- Over 30 Auckland apartment projects have been scrapped in the last two years
- More are expected to fall over
Why is this happening? There are three main factors
- Limited bank funding is available as the Australasian banks have reached their commercial lending cap
- Rapidly rising construction prices (e.g. - 25% increases in the last 18 months)
- Resource Consent hold ups while Unitary Plan changes are litigated
What are we currently seeing in the market?
- A number of unconditional purchasers of development land having difficulty in settling
- Banks reducing lending amounts as the income to interest rate coverage went to 2:1
- Residential flats are losing some attraction to buyers as the low yields, 40% equity requirement and less optimism of capital growth reduce buyer numbers
What is the outlook looking to 2017
- An increase in development land coming to the market
- Some of the city fringe land values coming off their peaks
- A flight to quality with developers picking only the superior development sites
- Opportunities for experienced, well-funded developers with proven track records to take advantage of a less competitive market.
With about six weeks to go until the end of the year, decisions need to be made if you are thinking of selling, buying or leasing. Please feel free to consult with our team if you require any advice or appraisals etc. We would be most happy to assist.
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