Are apartments a worthwhile investment?

Posted on 06 JUL

Q: We are thinking of selling our home in St Heliers and buying a luxury apartment somewhere closer to the city, but will we get the same capital gain with an apartment? Bruce L.

A: Unfortunately no-one can accurately predict what will happen to house prices, or to apartment prices for that matter. There was a time when investing in apartments was considered to be a far inferior choice to buying a home or duplex. The value of real estate is in the land, the experts said, so you should put your investing dollars in houses where the land value appreciates for many years to come.

However, that rule doesn’t always apply – certainly not these days.

There are plenty of new up-market apartments being built around Auckland now, and not all of them are in the City centre. There are new developments springing up in the suburbs, from Meadowbank to Mission Bay and out to Orewa, and the majority are bigger, more luxurious and in better locations than previously.

What this means is that many apartments now offer good solid capital gains in line with houses, due to their position and location: It might be better to own a small slice of a highly valuable piece or land, rather than a large slice of a lower-value patch.

But as well as that, there are more single and two-person households today than there’s ever been, and most of these people don’t want to live in a five bedroom house out in the suburbs. They want to be close to the CBD, close to work and entertainment, so the apartment market is growing. Our lifestyle has become more cosmopolitan, with beaches, cafes, and restaurants creeping higher on the priority list.

So the answer is that we really can’t be sure, but that experience overseas tells us that this new style of apartment will hold its own in terms of capital gain with more traditional real estate.

Next week we will give you a few tips on what to look out for when buying an apartment, luxury or otherwise.

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