PI in Auckland

[doctur]

Hi,

Sorry if this has already been discussed.

There is a lot of advertising in Sydney saying that there are brand new apartments in Auckland with a rental return of a minimum of 8% with a positive cashflow.

I was really excited and in April 2004 I paid $20K on a $200,000 dollar apartment. I settled about 4 months ago and still havent even found a tenant. I tried to sell it and contacted a couple of real estate agents and they said that the apartment could be sold for a max of $150,000 ($50K loss).

Is this correct.
Is Auckland property market good for PI?
Am I being conned by the real estate or was I conned by the developer when I purchased the unit at the price of $200K?

Any inputs please...

[drelly]

There have been a number of reports of falling rentals and prices on Auckland City centre apartments. Foreign student numbers have been decreasing, immigration is declining and there has been a massive influx of new apartments in Auckland this year. I had heard that more apartments came on the market this year in Auckland city than already existed previously.

Here's a few links from PT...

http://www.propertytalk.com/forum/showthread.php?t=4645

http://www.propertytalk.com/forum/showthread.php?t=4584

http://www.propertytalk.com/forum/showthread.php?t=4567

[doctur]

Does this mean that I have been had?

Can I do anything about it or I have lost $50,000 already?

[Julian]

Doctur,

Sadly it seems that the same sorts of people that were luring other Australians and Kiwis to the Gold Coast with grand promises a few years back have reared their heads in Auckland.

Due diligence is now paramount before signing on any dotted lines. And always remember that anything that sounds too good to be true most probably is.

I hope everything works out well for you.

Julian

[doctur]

Just to add to the topic I had asked one of the real estate agents about the capital growth and was told that there is no expectation of real estate growth for the next 5 years.

Also, more than 7000 apartments are currently either under construction or planned at Auckland. This means that the rental situation is going to get worse before getting any better.

The better part is "Hoping".

The saga continues...

[AustinWong]

Where in Auckland is your investment and what floor area is it?

Thought I don't know much about the apartment investments, it would appear to me from posts I have read that this is an important factor.

Perhaps if you could provide more information it may provide a clearer picture for those who wish to comment.

All the best.

[drelly]

I'm not sure about "had"... Perhaps the rental they suggested was a little optimistic or based on historical figures but it's still up to the buyer to qualify their numbers.

I guess one of the dangers of investing from afar is the necessity for more research than you would if you lived there and already had a feel for the market.

cheers,
Dave.

[kieran]

Well, thats a 25% drop in value...

I hate to say it but you can probably expect a further fall in the value over the next 2 years as the current oversupply creates high vacancies in the smaller apartments.

We simply dont have enough occupants for hundreds of empty apartments right now and this problem is likely to get worse over the next year or two.

The CBD apartment developers started struggling to make sales of these smaller apartments to local kiwis last year but then found 'easy pickings' by selling them to Australians who were unaware of the impending oversupply and inevitable fall in rents and values...

Doctur, I am reluctant to advise anyone to take a loss on property and I believe this property should prove to be a reasonable investment in 10 years or so but expect rents and values to fall further in the next couple of years before they 'recover'.

[martyparty]

There are just too many low end, cheap apartments in Auckland, while the smaller cities like Wellington, Christchurch and Napier just don't have the supply because all the construction resources are up north.

You took a risk and you lost. You must rent out the property to reduce your losses and look to sell the apartment or hold it long term. I would advise furnishing it to bring up the yield.

[casacamo]

Also, more than 7000 apartments are currently either under construction or planned at Auckland.

This is on the assumption they they will all sell at a predetermined value, otherwise the whole development will not break even. If the prices fall to a unprofitable level then a lot of developments will not get out of the ground or will send the developer broke, either way the investors stand to lose deposits etc.

Casacamo

[Dean@Massiveaction]

Kieran's covered everything but Doctur the lesson from this is do more research next time I guess and make it up on the next deal. The writing has been on the wall for apartments for some time. If they were such great deasl why are they being sold in OZ. We'd all be buying them locally!

[muppet]

Hi Guys

The problem Doctur is having is the precise reason that Marc and Donna set up PropertyTalk - so that investors could ask questions before buying and therefore be able to do a more indepth due diligence.

PropertyTalk was set up in the second half of 2003 and I am rather sad that so few property investor have even heard of our site and also so few investors actually take part in the forums.

There are approximately 175,000 property investors in NZ but only 3300 are registered members of PropertyTalk.
So fellow members get the word out and more members on board please.

Regards

[Rhys]

then lets change that!

who would be up for a paypal "donate" button on this site.
(perhaps with a proviso that the funds are used for its upkeep, advertising etc.)

get some sort of Branding going
Bumper stickers
Pens, Notepads, diaries (for those that havent made the move to electronic), all manor of junk that can be left on real estate agents desks and passed around to people as we bump into them etc.

just a thought.

[Rhys]

Doctur,

this is a bit seedy, but isn't prostitution legal back there now. rent it to "working Girls" on a hourly rate.

R

[Monid]

Nice Idea Rhys especially in terms of real estate agents, I'd support it!