In recent years, the likes of New York, London, Abu Dhabi, Sydney, and Melbourne have seen a meteoric rise in the number of super-towers boasting luxury apartments, which offer residents a heightened sense of opulence and breath-taking views over iconic skylines.

These palatial, inner-city paradises have proved to be a major investment tool in an increasingly competitive global market.

Safe-deposit Boxes in the Sky

From the iconic twin-towered, 30-story Eldorado apartment complex on New York’s Central Park West, opened back in 1931, to, more recently, The Shard in London, the popularity of luxury apartments has increased in line with the rise in global wealth.

Larry Fink, chief executive of American multinational investment management
corporation BlackRock, has gone so far as to say that properties such as these have replaced gold as the primary storage of wealth – for both individuals and corporations.

They’ve been referred to as luxury “safe-deposit boxes in the sky” due to the surety of their prestige, unrelenting popularity, and ability to yield returns. Just as we’ve seen in Australia’s major centres, Auckland is building upwards to combat an urban sprawl that continues to stretch city limits.

The extent of population growth in the city has meant a traditional horizontal approach to residential development is no longer sustainable. It’s putting the onus on the need to grow vertically.

With land at a premium, and the city in need of a reported 422,000 homes over the next 30 years, we’re headed towards a new era of apartment living.

Demand Likely to Grow

The media has reported that apartment developers are struggling to secure finance as banks tighten their lending criteria.

Consequently, after the current wave of planned developments are completed, we’re likely to find fewer new apartments becoming available, despite a growing demand for them.

So, the apartment stock that does become available in a few years’ time is then likely to sell at a premium – and that means there’s never been a better time to buy.

The increasing demand and lack of supply are the reasons why property in Auckland is seen as a secure investment. It also contributes to New Zealand’s reputation with overseas investors as a safe haven.

New Zealand’s Tallest Yet

When it comes to Auckland’s apartment offerings, the highest of them all will soon be The Pacifica on Commerce Street in the CBD.

The Pacifica is a 57 level, inner-city skyscraper, which is set to rise above the sparkling waters of the Waitemata Harbour.

‘Many astute investors see opportunity in counter-cyclical investments’

This $300 million luxury complex of 273 apartments and 45 hotel suites will become New Zealand’s highest residential tower. Its 57 levels will eclipse the 40-level Metropolis, which is currently New Zealand’s tallest apartment tower.

The Pacifica, which will feature a “super penthouse” on levels 53 and 54 (currently up for sale for $40 million), offers a secure investment, along with luxury and captivating harbour or city views.

Bespoke Luxury

Construction on The Pacifica is expected to be completed in quarter four of 2020. Icon Construction has now reached level 57 of the super-structure, however the floor slabs are yet to reach that high.

Interested buyers have one-bedroom, one-bedroom plus study, two-bedroom, and penthouse apartment options to choose from.

The amenities will include a lap pool, sauna, steam room, spa, gym, cinema, library, residents’ lounge, and barbecue terrace. Twenty-four hour concierge and valet parking will also be available.

Its developers say The Pacifica will offer a lavish standard of living in a hip and trendy part of the city, among Auckland’s finest cafés, wine bars, and restaurants.

Buy In The Sky

Prices for this slice of luxury range between about NZ$823,000 and around NZ$4.3 million, which is a snip compared to the sky-high prices for similar apartments in other cities around the world.

For example, Australian Developer Lendlease has announced the sale of it’s One Sydney Harbour three storey, 1600m2, nine-bedroom penthouse for a staggering AUD$140 million.

New Zealand’s costliest apartment sale was the NZ$15.3 million paid in September 2016 year for a penthouse in The International in Auckland, which was sold by CBRE.

However, interested buyers need to get in quick: 88% of the 273 apartments have been sold. The developers have just announced their final release of 32 apartments.

Investing In The Time Of Covid-19

There is no doubt that the Covid-19 crisis has impacted on the economy – and consequently the market.

On the positive side, interest rates are the cheapest in nearly 100 years. However, some buyers are nervous. Yet this lack of confidence can, in fact, be an opportunity for investors.

Most downturns - such as those prompted by SARS, the Asian Financial Crisis and the Global Financial Crisis - only last for relatively small time periods. But real estate markets stand the test of time and are a safe bet in times of uncertainty.

One strategy to remember is to buy low and sell high. This means that an investor buys when some others lack confidence and then sells, or reaps the benefit of the gains, when the market is high.

It’s called counter-cyclical investing. Many astute investors see opportunity in counter-cyclical investments.

Before Covid-19 struck, the market was rebounding strongly. The market has now slowed but this current market pause creates opportunity for those that believe the market will rebound strongly.

Investors should also remember that cashflow is king. With the cost of borrowing at an all-time low point of circa 2.9%, rental returns will be cashflow positive.

Quality corporate style tenants will be attracted to The Pacifica and high-value short-term leases can be managed by the on-site hotel operator.

This means that investors have the option to take a hands-off approach to the management of their property, while getting decent returns on their investment.
*Gavin Lloyd is CBRE’s national director of residential projects in New Zealand.