A TALE OF TWO MARKETS
As reported in The Sunday Star 3 rd June and NZ Herald 5 th June the Apartment Market continues in two divergent directions.
The “spruiker” off plan market will soon run dry but these non-Real Estate Agent- wind up salespeople are still doing real damage out there. A couple from rural South Auckland came to me three weeks ago looking for advice on a two bedroom, two bathroom, no carpark suite in Eden Crescent they had bought at a seminar off the plans.
They were told it would rent for $500/week (which was never going to happen) and they paid $266,000 + about $14,000 for furniture. They did not know how much rent the tenant was paying but they were receiving $310/week. They had not seen the apartment even though it had been completed 18 months ago.
The Management company was obstructive in the extreme and had even written into the Body Corporate Rules that we could not perform OPEN HOMES on the building. The purpose of this is to frustrate Agencies such as ours and prevent units selling, thus maintaining their “Manager” stock.
We cancelled the Management Contract, got around the marketing problem and ended up with four bidders competing for the unit which sold for $180,500, way above Reserve and a surprisingly decent price.
The point of this story is that the unit was never worth $260,000 or anything near it.
And you know by now that City Sales has refused to sell off plan for nearly four years now because we could see the damage that was going to happen. Yes it has cost me millions and I know you won't express grateful sympathy as you think I am overpaid anyway. Which is probably true.
This scenario is what my journo friends are describing when they scream headlines like “Apartment Crash” and all our clients take to a week of heavy drinking and nervous phone calls.
The “real” market is what I term the “secondary market” and this is the ordinary “I have an Apartment in Metropolis and I would like to sell it” i.e. the existing market.
This market is, in fact, finally increasing in value and will continue to do so until the dollar/m2 values reach closer to intrinsic (or replacement) cost. This market is being buoyed by first home buyers who cannot afford the average $500,000 for a suburban Auckland home but can afford $280,000 for a two bedroom suite with a carpark in the City.
We are selling Metropolis at around $6,000m2 (still!) and I am guessing around $10,000m2 would be replacement cost.
You do not need to be a brain surgeon to work out what you should be doing right now.
The number is easy to remember…go on say it out loud…THIRTY – THIRTY – SIX – OH – ONE now dial it and say to the nice person who answers: “I have just read Martin's June comment and I want to buy another Apartment.”
Go on, you'll make me really happy.
MARTIN
