Using the CoreLogic Buyer Classification data, which can be split in many different ways, we’ve looked at who’s buying ‘new’ apartments in Auckland and who’s been the most active for ‘old’ apartments. The data shows that the largest buyer group in 2019 to date for new* apartments in Auckland has been mortgaged investors – 34%, up from 29% in 2018 (see the first chart). First home buyers have also raised their market share for new Auckland apartments this year (from 16% to 20%), whereas cash investors have pulled back a bit (24% to 20%).

New Auckland apartments - % share of purchases (Source: CoreLogic)

Switching to ‘old’ apartments, or in other words the second-hand/existing market, cash investors are the largest buyer group, at 29% so far in 2019 (see the second chart). However, that is lower than 2018’s figure of 31%, and is in contrast to the rise in the share of purchases going to mortgaged investors (25%, up from 22% in 2018). First home buyers are less active in the old (14%) than new (20%) apartment segment across Auckland, although their ‘old’ market share has risen in 2019.

Existing Auckland apartments - % share of purchases (Source: CoreLogic)

There are many interesting insights revealed from this cut of the Buyer Classification data, but a key overall point from the new/old apartment figures is that they are further confirmation of the rising presence in the property market for mortgaged investors. We’ve highlighted lately how key factors for this rise in market share have included the low returns on other assets (e.g. term deposits) and the boost to confidence (and profits) that was provided by the scrapping of capital gains tax proposals.

However, another factor has been rising rents and, now, the start of an upturn for yields as well. Certainly, in terms of yields by property type, the appeal of apartments is pretty clear to see – for properties recently on the rental market in Auckland (not split by new or old), gross yields are already starting at a much higher level for one bedroom apartments than three bedroom houses (see the third chart). In Parnell, for example, the gross yields for one bedroom apartments (5.1%) recently rented out are easily more than double the figure for three bedroom houses (2.2%). Anecdotally, we also certainly hear quite a lot that yields on new-build apartments (and houses) are also higher than older properties, while new-builds are also of course exempt from the LVR lending speed limits.

Gross % rental yields (Sources: CoreLogic, MBIE)

Alongside better (and rising) yields, there is another strong reason why some mortgaged investors will have found Auckland apartments to be a good buy lately – that is, they may well have been finding sellers wanting to get a fast sale and managed to pick up some ‘bargains’. Indeed, as the fourth chart shows, in Auckland City (the old territorial authority area), the proportion of apartment resales made below the original purchase price has risen steadily over the past 2-3 years. No doubt some of these ‘loss-makers’ will have been snapped up by canny mortgaged investors.

Proportion of Auckland City resales below original purchase price (Source: CoreLogic)