There's big money being paid in Auckland's auction rooms and much of it is for rundown or tired-looking homes on large sections. Buyers are bidding hard to secure sites with development potential.
This week a six-bedroom on a 1214sqm section in the central Auckland suburb of Ellerslie sold for $3.813 million – nearly $1 million above the 2017 CV.
Bayleys agent Glenn Baker, who marketed the property over two weeks during lockdown, says he had over 60 qualified buyers show interest, 12 of whom registered to bid at the online auction on Thursday.
“There were 77 bids in 17 minutes," he says.
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“Some of those buyers would be looking at future development, but it’s also got good income from the three flats there."
It was the first time the property at 18 Arthur Street had been put on the market in 56 years. The listing highlighted its potential development, as the flat site was zoned terrace housing and apartment building and was right in the sweet spot - close to the shops, good schools and a train station.
22 Boyd Avenue, in Mangere Bridge, is expected to attract developers. Photo / Supplied
Baker specialises in these types of properties. Last month he sold a former state house on an 806sqm corner site zoned Mixed Housing Urban in nearby Greenlane for $2.4 million, and he is expecting a lot of interest in a 2734sqm section at 22 Boyd Avenue, in Mangere Bridge.
A quick glance at Auckland's auction results over the past month shows a huge appetite for these types of properties. Just this week, two neighbours in Howick netted $2.916 million after putting their properties on the market together. The buyer was a developer, who outbid four others to secure the 2173sqm site zoned mixed housing suburban.
And a house on 862sqm at 2 Oak Street, in Royal Oak, sold under the hammer for $2.728 million on Wednesday - $603,000 above CV. Barfoot and Thompson agent Paul Hodgman said 14 developers had viewed the property and there was a pre-auction offer of $2.4 million within seven days of the house hitting the market.
2 Oak Street, in Royal Oak, sold under the hammer this week for $2.728 million. Photo / Supplied
Three weeks earlier Hodgman sold a run-down bungalow on 807sqm of flat land at nearby 7 Erson Avenue for $2.71 million - $1.135 million above the CV and $900,000 above the reserve.
“Two properties outside double grammar zone, under 900sqm for over $2.7 million,” he says. “The interest rates are so low that the break even for holding these properties [means] that there is not a lot of pain involved [for developers].”
Hodgman says developers know there’s a market for putting up three or four townhouses that can be sold for $1.35 million to $1.45 million, or a generous standalone five-bedroom house that sells for $2.5 million, and there just aren’t many of these sites left to buy.
Developer demand is even bigger for the larger sites, says Colliers director of site sales Josh Coburn. Since the start of April, Coburn’s team has sold $330 million worth of property, ranging from a 7.5ha site at Westgate on Auckland’s western edge to the former Caughey Preston home in Remuera.
“We had eight to 10 bids on one, 18 bids on others. It’s not just one or two bids - residential is hotly sought after. We’ve had bulk enquiry for land for building sub-$1 million terrace units and we estimate [those deals] would house 2000 new units.
“From our experience post-GFC, it’s the opposite of what we’d expected,” he says.
Coburn says that with low-to-nil returns for their money in the bank, well-funded developers have no opportunity costs for holding the land, and know there is no risk of selling down 300 or more houses in a big project.
“They have total confidence they can sell anything they can build,” he says, adding that many developers are now confidently building private affordable housing even without KiwiBuild underwriting.
Big-scale developers are focusing on greenfield sites in city fringe suburbs that already have good infrastructure – roads, water and waste, utilities - and marketable amenities like shops and transport that will help sell the end product. The Hobsonville-Whenuapai-Westgate corridor to the city’s north west is in high demand, as are the new Drury suburbs to the south.
Colliers national director Pete Evans, who markets those end projects, says that competition for residential sites has intensified as a result of commercial developers switching to residential property on the back of softening demand for retail and commercial space.
“With low interest rates, it couldn’t be a better time for those well-funded developers. These sites are good for affordable to mid-range price points that the market wants.”
Evans says that the numbers stack up because for the first time in a long while, construction costs are contained: builders and contractors are offering “good build prices”, programme management has improved so projects are not blowing out.
And because the amount of appropriate land is running low, high prices are no longer a one-off rarity.
He says that even with the premiums being paid, the land prices are only a small component of the total price, so developers are buying to quickly get on site and get a project underway. “Terrace houses are flying out the door. You can stage it, build five or ten at a time and know that they will be desirable for real estate agents to sell.”
