An article appeared recently in the New Zealand Herald talking about dropping rents in the Auckland area. The article referred quite specifically to the Central Auckland rental market, which is primarily dominated by apartments.
This specific market is being heavily affected by the fall off in overseas students coming to New Zealand, but it is by no means likely to be the only area to be affected. Information on falling numbers in New Zealand’s other main centres is also being reported. Many learning institutions around the country are reporting drops in the intake of students for the New Year, and there were reports of six language schools going out of business over the Christmas period.
Students appear to be put off by the rising dollar (although many other currencies are also rising) and adverse publicity regarding the standard of education in New Zealand. This factor may be the biggest reason and is an indication that Government should introduce tough standards and regulations to ensure this relatively new and large industry does not collapse.
On top of problems with learning centres, there has also been a large increase in the number building permits for new apartments in the Auckland Central area. The number of apartments in Central Auckland is estimated to increase by 50% over the next year. Falling student numbers and an increasing supply of accommodation is a concerning trend, however it may not affect the entire market.
There are four different types of apartments.
- The serviced apartment, which is essentially operated like a hotel,
- Owner occupied apartments, which tend to be larger and well appointed,
- Rental apartments, which are a reasonable size and are aimed at city workers, plus
- Student accommodation.
It is the purpose built student accommodation that is likely to be effected mostly, however this in turn is likely to draw in the other sectors. Many people have bought off-the-plan for good prices which have given them a buffer in terms of increased equity and higher rental yields. These people are likely to be in a position to ride out any downturn that may occur.
If you do own rental apartments then it would be wise to review your numbers and make sure a fall in rental prices and value would not force you to sell the property or hinder your property plans. Call local property managers and real estate agents to get more information on your specific circumstances.
