Cheaper to buy than rent

Buying off-the-plan can work out cheaper than renting in today’s Auckland property market

Auckland, May 5, 2016 – Buying an apartment can be more cost-effective than renting in today’s heated Auckland property market, figures show.

“There’s a perception in the Auckland marketplace that first home buyers have been locked out,” says Pete Evans, National Director, Residential Project Marketing at Colliers International.

“In actual fact, figures show that buying a new apartment – which are still in an affordable price bracket for many – may be more cost effective than renting one.

“As Auckland becomes more and more like an international city such as Sydney or London - where high-density housing is the norm – we are likely to see increasing interest in and the development of high quality apartment buildings.”

Evans uses the example of a two bedroom apartment in Colliers’ latest residential offering – Flo Apartments in Auckland’s Avondale.

“Flo is set for completion late next year and features a mix of one, two bedroom and two bedroom plus study apartments – totalling 91 units.

“Two bedroom apartments in the complex range from 71.6 sqm to 78.6 sqm and in price from $495,000 to $750,000, with a rental appraisal between $520 and $600 per week.”

According to financial advisers Custom Financial, repayments for a $570,000 property – with bank lending at 90% and a mortgage over 30 years at a current interest rate of 4.19%, fixed for two years - could work out to $578 per week.

“These figures show a strong case for purchasing over renting – particularly in the case of off-the-plan purchases, whereby buyers are only forced to front up with a 10% deposit, compared to at least 20% for existing apartment purchases – and up to 50% when those apartments are under 50 sqm.

“Buying off the plan now locks in a purchase price while rents continue to push upwards in Auckland – so the saving in purchasing affordable new apartments compared to renting will only increase over time.”

Colliers’ latest research report on the apartment market in Auckland shows it’s been the busiest year for the sector since 2009.

“Insufficient supply for the level of demand for residential accommodation in Auckland’s apartment market continues to spur on development activity,” says Chris Dibble, Colliers’ Director for Research and Consultancy.

While the CBD will always hold a significant proportion of Auckland’s apartment stock, there is an undeniable rising popularity in apartment living in the city fringe suburbs such as Avondale, Dibble says.

“Rising house prices, greater emphasis on convenient lifestyles, demographic shifts of the baby-booming downsizers and better public transport have all been instrumental in the growing popularity of non-CBD apartment living.

“Developers have also played their part by providing higher quality products in sought-after areas with greater concentrations of amenities and facilities.”

ENDS

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