The demand for inner city apartments: a case study of Wellington, New Zealand

Abstract

Apartments in the commercial heart of the New Zealand city are a new phenomenon. They mark an important change from the existing demand for housing close to the city. Visually they are distinctive, financially they are a large investment, and symbolically they mark an important stage in the resurrection of street life in the inner city. Despite a general enthusiasm by developers, investors and consumers alike, very little is known about this new market. This research identifies the new apartment occupants, their characteristics, preferences and behaviour in the housing market. It contrasts them with a corresponding sample of new residents in houses close to the city. The result is a description of a new and unique housing sub-market that may represent the turning point in the use of land in the New Zealand inner city. These new developments reflect a substantial increase in the demand for inner city housing. Average house sales prices in Wellington City rose by 5.3% between December 1992 and 1994. Developers, perceiving an unsatisfied demand for inner city housing, took advantage of older unused building stock from an oversupplied weakened office market. The City Council keen to provide incentives for the rejuvenation of downtown relaxed conversion restrictions, granted tax incentives and invested in supporting infrastructure. The result was an addition of over 200 apartment units in the central business district in two years. The boom continues through 1996. The survey of apartment households undertaken for this study revealed that nearly all were without children, over 40% were single and had higher incomes than the suburban counter sample. Average expected length of apartment residents is only four years compared to 5.2 in the single dwelling comparison group and almost 30% of apartment buyers planned on retaining them as investments once they move. These findings suggest that apartment dwellers are a distinct demand group whose needs are met first and foremost by the apartment location. Associated with location is a lifestyle, a lifestyle that cannot be met by change of dwelling alone. It is in this sense that the inner city apartment becomes distinctive and behaves like an independent housing submarket.