A run-down leasehold property in the central Auckland suburb of St Johns has sold for tens of thousands of dollars less than what the owners bought it for 19 years earlier.
The three-bedroom, one-bathroom property on Caulton Street was listed in May with an asking price of $170,000, but there was a flurry of interest after the price was recently dropped to $100,000.
The owners paid $175,000 for it in 2004 and have been renting it out ever since.
Ray White Remuera listing agent Suzie Cox said she had more than a dozen enquiries on Friday, it ended up going into a multi-offer situation at the weekend and sold above the updated asking price. The sale is now dependent on St John’s Holdings’ approval.
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Cox said leaseholds gave people the opportunity to get into a better area and desirable school zones such as Stonefields School and Selwyn College when they otherwise wouldn’t be able to afford the million-dollar-plus area.
The owners effectively buy the house, which in the case of Caulton Street had an improvement value of $75,000, and the right to occupy the land which is valued at $1.5m.
The ground rent is $24,700 a year until May 2031 when its 21-year lease will come up for renewal.
Leasehold properties were common in St Johns, Cox said, but 21-year leases were becoming more and more uncommon. A lot of leases were now only seven years long and appeared to be less popular with buyers, she said.
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Cox said the new owner planned to live in the property and renovate it while waiting for their next home to be built.
The house needed work including new carpet and re-painting inside and out, she said.
The other interested buyers were single parents wanting to live in a central location and a developer had also shown interest with the view to redevelop it and put five or six townhouses on the 855sqm section.
The property was a lucrative investment property for the outgoing owners for the last 25 years. However, they now live in Australia so decided to sell.
“They’ve got all the rent over the years and it’s been a good investment to them, but it’s surplus to their requirements and they don’t live here.”
Cox said leasehold properties varied in price depending on their condition and prices ranged from under $100,000 to just over $200,000.
The property needs a paint and new carpet. Photo / Supplied
A property with two dwellings on Howard Hunter Drive recently sold for $95,000. Photo / Supplied
A property on Howard Hunter Drive in St Johns sold in May for $95,000 and had four dwellings including two homes, a studio and a cabin on it to help cover its yearly ground lease of $58,000, while another do-up sold on the same street for $120,000.
Cox is also selling two leasehold units at 30 Caulton Street that has an asking price of $219,000.
Ray White Orakei director Jane Horgan said St Johns leasehold properties were typically snapped up by savvy property investors who have more than one leasehold property. “Whereas your run-of-the-mill purchaser, it’s hard to get them to look outside the square. But they can be financially profitable.”
Horgan also knew of people who had added extra dwellings to their properties to help cover the ground rent. “You almost have to, to be fair, when some of them go up in price.”
Horgan’s business partner John Campbell added that leasehold properties also had different lending criteria to freehold properties.
Last month Campbell and Horgan sold a two-bedroom property on Simkin Avenue, in St Johns, to a family for $181,000, which was $20,000 more than what the owners paid six years ago, while a larger unit in the same block at 3/21 Simkin Ave is asking for enquiries over $200,000. The owner is relocating out of Auckland so is selling.
The advantage of buying a unit in this block is that they all split the ground rent to lower the cost as it would otherwise be cost-prohibitive.
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