Most vendors in New Zealand will have an idea of what to do when their property passes in at auction. But do the rules change when big sums are involved?
What happens when your home passes in auction? Most Kiwis would have an idea of what the process is - negotiate with the highest bidder to see if a price that's acceptable to both parties can be met.
But what happens when the property in question passes in at an eye-watering amount? That's the situation facing the vendors of a prestige apartment in Sydney, Australia.
The level 40 penthouse at in the Horizon tower passed in on vendor bid of A$16m (NZ$17m) at auction at the weekend, although expectations are high that a deal will be sealed this week.
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A$16m might sound a lot of money but is par for the course in the reheating apartment market across the ditch, says Auckland real estate expert Pete Evans.
Evans, who is national residential manager for Colliers International in New Zealand, says the Horizon, in Sydney's upmarket Darlinghurst suburb, is in such a well-known building it probably won’t hang around for long. “A416m for a Darlinghurst apartment is, to a degree, normal in Sydney - there are heaps of transactions between $10m and $20m in the city.”
Evans said the usual post-auction negotiations would likely be underway, depending on the number of bidders and the conditions the bidders may want.
“It will all be about if someone is cashed at a certain price or if someone needs more terms at another price.
“The agent will be working with both parties trying to work out which suits the vendor the most and if the vendor is prepared to accept which offer.”
Evans says the fact the apartment was passed in doesn’t mean it had been priced too high, it just meant it didn’t reach the amount the vendor would like.
The auction clearance rate in Sydney is 80 per cent so they are likely to reach a deal, he says, but the apartment market is so different to New Zealand’s it would be like comparing apples with oranges.
In Auckland, just five per cent of sales are apartments but at least half the properties sold in Sydney are apartments.
Matt Baird, head of Barfoot and Thompson’s projects division, expects high-level negotiations would be underway in Sydney. “At that price point you’re dealing with sophisticated buyers and it’s pretty rarefied air, the amount of buyers at that level, so the agents would be treating every buyer with kid gloves really.”
Baird says New Zealand has few apartments in the $16m price bracket. “I’d say over $5m there might be 20 apartment sales in total. Over $10m, one or two.”
Barfoot and Thompson is selling Auckland central’s prestigious Wynyard Quarter waterfront development and there apartments might reach $5m to $8m, he says.
But apartments across the Tasman are a lot bigger, he points out.
The Horizon Apartments penthouse that passed in in Sydney is 565sq m internally - and that’s simply huge, Baird says.
“That’s three times the size of an average new build home here.”
But while the Sydney apartment is reportedly the largest single-level apartment in Sydney, “if you work out the square metre rate of that apartment we’re selling stock here for similar square metre rates down at Wynyard Quarter - but they’re not as big so it brings the price down.
“The bigger you go, from our point of view, the higher price you’ve got to achieve and so it gets to a point where there are no buyers at that sort of number and you’re better off not making them so big - they’re still penthouses, still 200sq m plus, but certainly, 565sq m, that’s enormous.”
