Inner City Pressure: Lower rent, more rentals in Auckland CBD in pandemic NZ

Covid-19 has wrought big change in Auckland’s city centre. With international students and foreign workers nowhere to be seen, concerns are mounting that it’s becoming a crime-ridden ghost town. But amid the darkness are glimmers of hope. Stuff explores the future of downtown Auckland.

Third-year Auckland University student Sarah Mitchell moved back to the city centre last year after weighing up the benefits against living in suburbia.

Paying $420 a week for a two-bedroom flat, which she shares with a flatmate, Mitchell said she’s saving on transport costs by being closer to university.

Mitchell has three other friends who moved to the city centre within the past six months and got apartments at cheaper prices – affordability with fewer flatmates was part of their consideration, she said.

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Architecture student TJ Pereira was already living in the central city pre-Covid. He was pleased to get a $45 weekly discount after the first wave of Covid hit in March 2020.

Two years after the arrival of Covid-19 and subsequent border closures, the loss of international students and visitors have contributed to the central city becoming one of the few places in the city where rental and housing prices have dropped.

CoreLogic data shows while the median rent across Auckland has risen by 7.1 per cent over the past year, the median rent has dropped by 2.2 per cent in Auckland Central east, and increased by 1.2 per cent in Auckland Central West.

Data from the Real Estate Institute of New Zealand (REINZ) shows a 7.4 per cent decrease in Auckland central city’s median rent since October 2019.

The median sales price of Auckland central city flats dropped 16.5 per cent and faced a 17.4 per cent decrease in sales count over the past year, according to REINZ.

Meanwhile, provisional estimates from Statistics NZ show the population dropped in the city centre from 36,000 in 2020, to 34,800 in 2021, under the bigger backdrop of Auckland’s entire population decreasing for the first time in 25 years from the effect of Covid.

Lower rent, more rentals

CoreLogic’s chief property economist Kelvin Davidson said central Auckland apartments had “underperformed the wider market” with a lack of tourists and foreign students leading to properties being empty for longer.

Similarly, Crockers Group chief executive Helen O’Sullivan said she’d noticed higher vacancy rates in the CBD in general compared to pre-Covid.

She said most property investors were “holding on” and hoping to see the border reopen in 2022, but added that while she was “optimistic” about the recovery, “I wouldn’t put a date on it, it will be slow and steady”.

Auckland Property Investors Association president Kristin Sutherland said members with city centre properties were opting for long-term strategies and lowering rents to attract people.

Affordability the draw for a taste of city living

Long-term central city resident and secretary of the Auckland City Centre Residents’ Group Oscar Sims said there’d been noticeably fewer people around since the pandemic started.

But Sims also sees an opportunity in the reduction of housing and rental prices in the city centre.

“It’s an opportunity for young people to own something … Also with rents coming down, more people can get a taste of high-density living,” he said. “This is an opportunity for New Zealanders to embrace it more.”

Sims said over the past two years, he’d noticed more young professionals moving into the Metropolis building where he rents.

Oliver Xu, a graphic designer in his 40s, is trying inner-city living for the first time because it’s offering him a better deal.

Xu moved to Zest Apartments in May this year after his elderly father moved to New Zealand to live with him. He needed a place with close access to amenities, restaurants and a hospital.

Xu, who previously lived in an east Auckland suburb for 10 years, said the move initially brought “mixed feelings of excitement and fear”, but that soon eased.

“From living in the CBD for only a few months, I’ve already felt that I am a part of a community and connected with others more than [in the suburbs] in the last few years,” he said.

“Auckland CBD needs more young and energetic people to join and bring it to life again.”

Xu said one of the highlights during lockdown was going for regular walks around the waterfront and in Westhaven with his dad.

Another first time central-city dweller Andi Burrell moved from a house in Albany to a high-end Lorne Street apartment six weeks ago.

The 51-year-old remedial specialist said rent for the one-bedroom was cheaper than he’d expected, at $675 with parking and a great view of the harbour. He was enjoying “the accessibility to everything”.

“The motorways are really accessible … The floor that I’m on, the views are amazing,” he said. “I don’t think I’ve been happier to live somewhere so small, it’s very compact.”

Well-known Auckland figure Max Tweedie has lived in the city centre since 2018. Lowered rents mean he and his flatmates could move into a bigger flat and still keep rent within 30 per cent of his income.

As Auckland came out of its most recent lockdown, Tweedie said he was glad to see Victoria Park bustling again with picnics, more people playing sport and doing outdoor exercise.

Tweedie said he looks forward to more social spaces in the central city and for it to become a diverse centre for people of all incomes.

“We need to attract more people to live in the city,” he said, adding that the spaces should be designed to prioritise people living in the city rather than people travelling to and from work.

From corporate central to home hub

Chamanthie Sinhalage-Fonseka moved to Auckland last year with her husband. In her words, through “a quirk of Covid” and many vacant apartments, they were able to rent a much better central-city flat than the one they had in Wellington for a similar price.

They even knocked $100 off their weekly rent in September this year, she said, when prices had fallen further across the city centre.

However, Sinhalage-Fonseka, who’d worked as a consultant advising cities on housing and economic development, said despite the current affordability of city centre apartments, the city still needs to work on attracting people.

“Having empty stock doesn’t mean people are going to live in it, the city’s got to make a pitch for itself,” she said.

Sinhalage-Fonseka said a report she contributed to, which advised Wellington City Council on affordability, job market and quality of life, showed talent was attracted to cities that offered housing affordability.

She said Auckland’s city centre should make the most of its period of high supply, affordability and decent quality of housing to attract talent “while this window of opportunity is still open”.

Infometrics economist Brad Olsen has a similar view.

Olsen said the current affordability of Auckland’s city centre housing could play a part in its Covid recovery.

“Affordability is key one in the sense of, where people base themselves is also where their economic activity is focused on,” he said.

“We know economic activity is broadly focused on where people work and live, and increasingly people are operating from home.

“Central city either becomes more residential-based, or it’s forced to lose that advantage it had through the full-on corporate environment that was originally there.”

Olsen also said the central city needed to become more residential-based as it could not expect to bounce back to exactly how it was pre-pandemic, in terms of the level of corporate office activity.

He said the future of the Auckland central city would not just be “corporate central” but would shift towards creating a better social vibe and catering to people’s lifestyles, public transport changes and needs for services.

Olsen said across New Zealand, cities would have to “reinvent themselves” as he predicted it would be awhile before there was a wider “reconnection with the world”.

“The previous status quo won’t come back,” he said.