Small is the new big

by Donna Chisholm / 10 December, 2015
The advantages of a “lock-it-and-leave” apartment lifestyle are obvious in the holiday season – no lawns to mow and better security. But are we ready to give up the dream of a quarter-acre paradise?
Dave Tracey Platt
David and Tracey Platt bought their luxury central city Wellington apartment off the plans after seeing the view. Photo/Hagen Hopkins


When David and Tracey Platt’s children left home, the couple, like many empty nesters, decided to sell the family house in the suburbs and move to an apartment.

Out went the 320sq m home in Khandallah, just north of Wellington, and in came the shiny new 175sq m apartment in the capital’s city centre.

Usually, it’s the sort of trade-off that allows 50- and 60-somethings to live in more compact surroundings at a cheaper price and spend or invest the extra cash.

Only this time, the three-bedroom apartment, part of the luxury Clyde Quay Wharf development in the old overseas passenger terminal, cost much more than the Platt family home fetched when it sold.

The cheapest of the 76 apartments in the $180 million development, which opened in June last year, sold off the plans for more than $1.2 million. The average price was $2.4 million, the most expensive reportedly $10 million.

These are apartments, but not as we know them. Where once the word conjured up visions of leaky, monolithic eyesores stacked with shoebox-sized bedsits, a combination of new urban design rules, developers’ vision and increasing demand from owner-­occupiers is changing the face of apartment living. Platt, co-director of a real estate agency, says he and his wife decided to buy “on the spot” after hosting his daughter’s 21st in the terminal five years ago. The party was in the exact spot that’s now his lounge.

Dave Tracey Platt
“You almost pick up another day each week by not commuting.” Photo/Hagen Hopkins


“We’d made the decision to move into town, and were thinking to look for a little house in Mt Victoria or Mt Cook. But at the function, the views – back to the city one way and straight down the harbour towards Oriental Bay the other – were stunning. We signed up the next day to buy off the plans.”

Clyde Quay developers Willis Bond & Co are also behind Auckland’s latest lavish waterfront complex, where $200 million worth of apartments have sold off the plans since April.

The average price of the 51 apartments in the seven-level block at 132 Halsey is $2 million-plus; those in the nearby 10-level Wynyard Central range from $565,000 to more than $3 million. Former All Blacks coach Sir Graham Henry was one of the first to buy at 132 Halsey, saying the area was an exciting part of a growing city.

They’re the sort of pricey developments that have pushed apartment prices up over the past year: websites realestate.co.nz and Trade Me report 30-49% increases in asking prices.

Prime Minister John Key and mayor Len Brown attended celebrations for the start of construction at Wynyard Central in mid-October, endorsing both the development itself and apartment living in general.

“It’s a great way to live: lock and leave, and you don’t have to spend weekends worrying about mowing lawns,” Key said.

Brown said that in April, for the first time in his council’s history, building consents for apartments outnumbered those for detached homes – although that figure has proved to be more of a blip than a trend.

In November it emerged that changes to the Unitary Plan being considered by Auckland Council look likely to allow intensive apartment developments in the city’s so-called “leafy residential suburbs”. This prompted concerns about the impli­cations for schools, traffic and suburb character.

And, as political opponents have pointed out, the sort of apartments being built around the Viaduct won’t be doing much to solve the city’s affordability crisis.

8 House
The 8 House in Copenhagen. Photo/Getty Images


“We’re simply reflecting how people want to live their lives,” says Willis Bond managing director Mark McGuinness. “We’re responding to demand, not creating it. It’s about choices. It’s about being able to walk out your door to a nice restaurant at night – living, working and basically enjoying life in the city.”

Marketing for the development describes it as “a new way of living”. McGuinness says that although we’ve long had apartments, “I think Aucklanders have had a couple of false starts with inner-city living, where perhaps the quality of the buildings wasn’t up to scratch, which has made people think twice about it as an option.”

It’s easy to think of a number of shoddy blocks that were allowed to blot the cityscape before former mayor Dick Hubbard introduced new urban-design criteria in the mid-2000s, but even owners of apartments in the then most opulent tower in town, Metropolis, saw values plummet after buying off the plan in the late 1990s. Tales of body-corporate battles and steep ground-rent rises have also fed the ­apartment paranoia.

In the Willis Bond development in Auckland, apartment buyers will pay body corporate fees of up to $8500 a year, but they won’t pay any ground rent. There is a catch, though – after 128 years, ownership of the properties reverts to the council.

“The city owns it, and people walk away,” says McGuinness. “It’s very similar to London. It’s such an important piece of land for the city, that strategically, they want the ability to take it back and go again.”

There’s a good-faith obligation after 90 years, he says, to negotiate and extend the lease by agreement.

It’s a big challenge to the traditional model of buying a patch of land that can be handed down through the generations and “something people have to get their heads around”, McGuinness says. “People are more sanguine now about passing on the family jewels. I think there is an element of people living for the now.”

Mark McGuiness
Walking the talk: Mark McGuinness is managing director of the Willis Bond development in Auckland, and lives in a Wellington apartment. Photo/Ken Downie

LESS STRESS


McGuinness is walking the talk. Like Platt, he and his wife have also moved into an apartment at Clyde Quay Wharf, leaving their four-bedroom home on a full section in Khandallah.

“It’s sort of changed our lives. I loved Khandallah; there was a great com­munity with a good infrastructure and lovely people. But my wife and I save about five hours a week commuting time, we walk to and from work, so we’re fitter and have lost weight. Before, I’d climb into a car, drive through rush-hour traffic and be as stressed when I got home as when I left the office. Now, you bump into a few people you know on the way, and when you walk in your front door you’re in a completely different state of mind. It’s quite therapeutic.”

So, are we embracing an apartment lifestyle as never before? Richard Burton, a former resource management consultant who now chairs the ginger group Auckland 2040, set up to tackle contentious aspects of the ­council’s Unitary Plan, says “embracing” is too strong a word: we’ve begun to accept it, but only reluctantly. “Most studies out there say people’s preference is still for a stand-alone house on a piece of land.”

“The Housing We’d Choose”, an Auckland Council-commissioned online study released in May and involving up to 1400 households, found only 15% who preferred to live in a low-rise apartment, and even fewer – 8% – said they’d choose a high-rise. More than half preferred a detached house.

Yes, says Burton, there may be significant numbers – of young singles or couples, and empty nesters – who find apartments desirable, but “most young people still aspire to having their little piece of green with perhaps a relatively modest house on it. I don’t think they’ve given up hope, but the risk is, it’s becoming unrealisable.”

Apartments are part of the answer to increasing Auckland’s housing density, but certainly not the whole solution, he says. The main issue is where they should go. High-rise apartments have usually worked in city centres, with the height of the development decreasing and size of the apartment increasing in suburban shopping areas and transport hubs. But multi-storey apartments in residential suburbs? No. There, intensification can be achieved with one or two-storey terraced houses on smaller plots, he says. “The look and feel of it isn’t going to be dramatically different to what we’ve got now.”

Dakota
Old-style apartments: Dakota Apartments in Manhattan. Photo/Alamy


The graduation is vital, he says. We need intensification, but on a suburban scale. “Apartment buildings in a suburban residential environment are highly antisocial because, they’re big, they’re bulky, they’re rectilinear. There’s loss of privacy, loss of sunlight and parking issues.”

He says the Proposed Unitary Plan allowed three-storey apartment buildings throughout Auckland. “I said, ‘This is crazy. We’re not going to allow it’, and Auckland 2040 was born.”

Representatives of the coalition spent two hours in front of the council’s Independent Hearings Panel in October. Burton says he was questioned as to why there should be any minimum size for apartments. “They were saying there is no cost benefit in having a minimum dwelling size and I was jumping up and down saying ‘Yes, there is!’”

Internationally, he says, cheap, minimally built, tiny apartments have led to overcrowding, ghettoisation and social issues.

Ludo Campbell-Reid, the English planning specialist hired by the then Auckland City Council a decade ago to head its design office, says minimum sizes are a useful safety net but good design makes density almost invisible. Density, he says, is our destiny – and apartments are part of that picture.

“We’re growing up; realising that there are other ways of living. If you are going to shift people away from what they do today, you have to seduce them. For many years, Auckland didn’t have a choice of lifestyles. It had the city, which was ugly and dirty and perceived to be dangerous, and the suburbs, which were leafy and green and full of historic villages and grand homes. That was the idyll that New Zealand talked about, but we’ve got to provide a place for people who don’t want to live that life. If you don’t provide it, they’ll go to Sydney or Melbourne or London. Up to 20% of the target audience we want to attract are ­creatives – entrepreneurial people of whatever age and denomination. They are a mobile group and they are the ones that go to the cinema, and cycle and do sport. They create a different type of living, which is much more urban. They don’t need the trappings of the garden. They don’t want to spend life decorating the house.”

Apartment valuation specialist Ian McGowan, a director of Seagar and Partners, says the difference in this development cycle compared to the pre-GFC one, is the greater ratio of apartments built to suit owner-­occupiers – particularly empty ­nesters – rather than investors.

Yemen housing
Adobe housing in Yemen. Photo/Alamy


And with the value of their big homes in the suburbs rocketing, they could often afford a $2 million apartment and still pocket some change.

“There is also a segment that has been priced out of the housing market and their first home is an apartment.”

Steve Groves, sales director for boutique apartment developers Urban Collective, says that’s the group he’s seeing more of. “Until now, they’ve never considered apartments … they’ve always had the blinkers on. They’ve gone to house auctions with $1 million to spend and the opening bid is $1.2 million. They’ve started to look outside the square.”

Of course, that doesn’t mean developments are guaranteed to work, even in today’s overheated market. The Orakei Bay Village project, which planned 400 apartments and 100 townhouses across Hobson Bay and the Orakei Basin, stalled in August. Those who bought off the plans have been offered their money back as cost over-runs skittled the idea, at least in the meantime.

Campbell-Reid says cities don’t need apartments that “jump out and say, ‘Hey, I’m really sexy new architecture’, but rather buildings of good quality, with good bones, that are well-proportioned, well-designed and well-located. They are the back story, they need to be invisible.”

The dream of the quarter-acre paradise is now just that. “It just isn’t available in Auckland any more. We’ve subdivided our own properties. I see these amazing photographs of beautiful villas, but lo and behold, look down the side and there’s a concrete driveway running to the back of the garden and the garden is no longer – it’s someone else’s house. I think the problem with Auckland is that it has never had options. What we are trying to do is create choice.”

For most, that choice will no longer include the house with a white picket fence, but Campbell-Reid says we will eventually get over that.

“We have to, because econo­mically and environmentally, we will fail if we continue to desire that as our dream.”

David Platt is one who says he’s living his dream now in the middle of Wellington city and has no regrets about the move.

“You almost pick up another day each week by not commuting. This morning, I got out of bed at 6.15, grabbed a paddleboard and spent an hour on Wellington Harbour. The lifestyle has definitely changed for the better.”

Victoria Street precinct
Construction begins in May 2016 on the Victoria St Precinct in Wellington.

Going up


Apartments in dozens of new developments are selling now off the plans, after the market stagnated between 2010 and 2015.

AUCKLAND

•  Queen’s Square, 438 Queen St, 161 apartments, $380,000-$1.1m. 92% sold.

•  Victoria Residences, Victoria St, 220 apartments, $380,000-$1m. 78% sold.

•  Alexandra Park, 223 Green Lane West, 236 apartments, $530,000-$2.25m. 70% of first stage sold, 14% second stage.

•  The Citizen, Exmouth St, Newton, 94 apartments in two buildings, $450,000 (special housing zone, capped price) to $2.3m. Sales opened mid-November.

•  Sugartree (stage 3), Altro, Nelson St, 250 apartments, $469,000-$1.2m. 40% sold.

•  132 Halsey, Wynyard Quarter, 51 apartments, from just under $2m to $5m-plus. (Penthouse price undisclosed). 80% sold.

•  Wynyard Central, Wynyard ­Quarter, 113 apartments, $565,000-$3m-plus. 65% sold.

•  Vinegar Lane, Soho Square, ­Ponsonby, 150 apartments but only 88 are being built for sale, $900,000 to $1m-plus. 52 left.

West kilmore chch
Stage 1 of the $40m West Kilmore Apartments in Christchurch will be finished next winter.


CHRISTCHURCH

About 30% of the 1200 apartments and townhouses lost in the earthquakes have been replaced so far. The market is strong because of low supply and high demand.

•  West Kilmore Apartments, 52 ­Kilmore St, inner city. 36 apartments, $540,000 to $1.2m. 30% pre-sold.

•  Rakaia Apartments, 50 Kilmore St, inner city. 14 Apartments $420,000 to $975,000. 86% pre-sold.

•  Verve Apartments, 52 Peter­borough St, inner city. 65 Apartments, $399,000 to $1.85m. 30%  pre-sold.

•  Preston Central Apartments, 272 Barbados St, inner city. 25 apartments $319,000 to $595,000. 35% pre-sold.

•  Leicester Apartments, 282 Madras St, inner city. 43 apartments, from $465,000. 95% pre-sold.

•  118 Bealey Ave, inner city. 24 apartments, from $335,000 to $449,000. 55% pre-sold.

•  Preston Residences, 194 Worcester St, inner city. 30 apartments, from $279,000 to $625,000. 91% pre-sold.

•  St Martins Green, Waltham. 84 apartments, from $315,000 to $445,000. 60% pre-sold.

WELLINGTON

•  Victoria St Precinct. Began selling off the plans less than three months ago. Of 65 apartments in the first building, 39 have sold for $350,000-$700,000. Sales for a planned second building of 70 apartments will begin in 2016.

•  Craig Stewart, managing director of property developers Stratum, says investors are returning to the apartment market for the first time since the GFC and demand is outstripping supply. Stratum has just sold the 82 units in the new 16-floor Elevate Apartments in Taranaki St.

John Jan Wood
John and Jan Wood: “We have made a conscious decision not to clutter and it’s an incredible feeling of freedom.” Photo/Ken Downie

Village people


Three generations of a family live in three apartments in the Auckland Viaduct.

John and Jan Wood are on their second attempt at apartment living in Auckland’s Viaduct after an ­abortive move about 10 years ago saw them scuttling back to their farm, disappointed. It was just too soon, says Jan, now 73. In those days, before the waterfront developments brought on by the 2011 Rugby World Cup, Auckland city emptied at 6pm.

“There was nothing going on, it was just dull. We’d bought an apartment for nearly $2 million in the Lighter Quay and after two or three years, we thought ‘Uh-oh.’ There were no restaurants in walking ­distance, nothing along the waterfront … it was boring.”

This time – they’ve bought a two-­bedroom $500,000 unit in another Lighter Quay block – they couldn’t be happier. “We absolutely love it.” So many restaurants have sprung up near the precinct that the couple now eat out every day for breakfast and dinner. “After 53 years of marriage, I don’t cook any more,” says Jan.

They decided on a more modest apartment this time, to free up capital for reinvestment and lifestyle. They’ve downsized their Waitoki farm about 40 minutes north of Auckland, frequently travel internationally and bought a 50-foot launch for John’s 75th birthday this year.

“We’re not young [but] we like action,” say the couple, whose sons Nick and Tim founded internet service provider ihug in the mid-1990s.

Such is their enthusiasm for apartment living, three generations of their family now live in the Lighter Quay – they’ve bought a unit for their two grand-daughters, one son took over their old apartment and Jan’s sister and brother-in-law are moving into their block in March.

“It’s like being part of a little village, even though it’s a city and I think that will be the success of Auckland,” says Jan. “I absolutely love sitting among the buzz of people going to work, listening and talking to younger people.”

The most noticeable feature of their waterside apartment is the absence of clutter. The farm has “bookcases for Africa” and magazines stacked everywhere. But at the apartment, “you have to think differently. We have made a conscious decision not to clutter and it’s an incredible feeling of freedom – the more you shed, the better it is.”

Books – they’ve bought 955 of them online – are read on devices and the only sign of food is a fruit bowl. If you don’t cook, says Jan, you don’t need much.

Because of their frequent travel, they tend not to hoard. Previous homes have been sold with everything, down to the linen, included. “If you want to keep precious things to hand down, get a storage unit. And if you want to read or handle them, put a chair in there.”

New Zealanders, she says, need to “reprogramme” themselves.

“Kiwis who want the quarter-acre paradise … it does not exist. Young people can’t get what they want because of the price. It makes me despair but we have to rethink everything. All the big cities have been doing this for years. And we are a big city now.”

Martin Dunn
Martin Dunn.

Size isn’t everything


Leasehold, freehold? Small, large? Ground rents? So many questions, but a growing number see CBD apartments as the answer.

After flatlining for years, apartment prices are shooting up. Early in December, Trade Me said the price of apartments on the site had risen 49% in 12 months, and realestate.co.nz reported a 31.5% rise. Estate agents said values are being skewed by the new, more expensive ­developments in the CBD.

Apartment supply stagnated between 2010 and 2015 in the fallout from the Global Financial Crisis. In Auckland in 2010, there were 25,000 apartments in 450 buildings in the CBD, and another 2000 on the city fringe. Five years later, there are only 26,000 in the CBD and about 3000 are under construction or likely to go ahead.

Prices began to climb steadily from early 2011 and have sharply ­accelerated recently, partly due to value increases in stand-alone homes also spilling over into apartments.

Apartment real estate specialist Martin Dunn, managing director of City Sales, says that after sitting for years at about $4000 per square metre, prices for existing properties reached about $6000 in March and increased to $9000 over the following three months. “We are now selling a lot of existing stuff at near-new prices.”

New apartments are selling for about $10,000 per square metre off the plans and in the Wynyard Quarter for about $12,000-$20,000 because of the location and quality of construction.

“Ten years ago, when we sold an apartment for $400,000, there was almost a celebration – there were drinks on it. Now we are selling apartments for ­$700,000 to $1 million all day long.”

Dunn says buyers are still “terrified” of leasehold, but “the pendulum has swung too far against it – it’s ridiculous”.

“I had a guy who has two kids going to university next year who wanted to buy an apartment. To get a freehold two-bedroom place with a carpark in a building like the Connaught or the Statesman [on the edge of the the University of Auckland’s city campus], it’s going to cost him nearly $700,000. If you go just down the hill and pay $100 a week ground rent [to Ngati Whatua], it’s $250,000.” A total of $11,000 a year would cover the rent, rates and body corporate fees.

“If you were buying it for one child, a flatmate would pay $12,000 a year ($250 a week) to cover those costs.”

Dunn says although he had never touted capital gains for apartments, prices are rising, pulled up by the housing market and the cost of construction. A staffer who paid $350,000 four years ago for a two-bedroom apartment with a carpark, overlooking the water at Lighter Quay, Viaduct Harbour, now estimates it’s worth more than $600,000.

About 90% of apartments are freehold, but in leasehold pockets in the CBD, there are about six different ways of setting ground rents. For example, he says Princes Wharf rents are indexed to 6% of the value of the highest residential land sales in prime coastal areas. Ngati Whatua’s mechanism for developments such as the Scene Apartments is based on 6% of the highest unimproved value of the land.

Dunn says he’d always direct a buyer with, say, $1 million to spend towards freehold “because they can, and freehold is always better than leasehold”.

The expensive and luxurious apartments around the Viaduct are being snapped up – 70% sold within three months – but that’s as much as, or more, to do with location than quality. The Stamford Residences – lavish apartments in Albert St – have been much harder to shift.

“There is an appetite for $4 million apartments in Devonport or Remuera or St Heliers but not yet in the bottom of Albert St where the owners come out and get chutty gum on their expensive shoes and pushed past by students,” says Dunn. “That’s the truth of it.”

He is against minimum-size restrictions. “Apartments of 20sq m are permanently full and people are happy as sandboys living in them and it’s all they can afford. There’s nothing wrong with them. If we could put out 20sq m studios again, at $10,000 a metre, that’s $200,000 and we could wipe the housing shortage with a stroke of the mayor’s pen.”

This would mean that young people could buy an apartment as an investment to get on the property ladder, with a 6% rental return.

The council increased the minimum size of apartments from 30 to 35sq m metres in 2007. “But that makes the minimum price $350,000 – it’s all wrong and completely unnecessary.”

Oversupply isn’t a risk, he says, because Auckland needs 14,000-20,000 new ­dwellings a year, but is getting only about 6000.

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