While there are plenty of headline stories of neighbouring property owners hitting the jackpot when they sell together to developers, not everyone is going to be as lucky.
Finn Hurst, co-director of Ray White’s Auckland commercial group, told OneRoof that his data shows there’s not always a premium for neighbouring sites.
“While the suburban [infill] market is absolutely pumping, adding value to sites is not just adding 2 plus 2. That might give you a marginal increase [because] there’s a bit more plottage, but other things come into play.
“Developers always like an active road frontage, as it helps their marketing and improves the profile of the development they’re selling. They also look at what they can fit on a site under height to boundary rules – for example, they can get more buildings on a wider site compared to a long narrow one close to neighbours.
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“They also look at where they can add common areas like parking, and how they’ll share the cost of infrastructure, water connections and driveways.”
Hurst said that deep-pocket developers were keen on the eastern bays and Remuera, where they can sell finished homes for an upscale price point.
“But sites there are harder and harder to get. Interest is moving to west Auckland and even the North Shore as a lot are saying South Auckland is a bit too saturated and too competitive now," he said.
A pair of properties on Patteson Avenue, in Mission Bay, Auckland, were snapped by developers for $6.7m. Photo / Supplied
“The North Shore has always been held back by hilly terrain, making it more expensive to get out of the ground, but there’s more and more interest there now.”
He said that mid-scale developers with between 15 to 30 houses per development were now edging closer to the mass builders like GJ Gardner, Fletchers and Neil Homes who were mostly focused on greenfields home and land sites on the edges of the city.
One of those developers is Williams Corporation. The Christchurch-based company, which switched to multi-unit developments about six years ago and now has offices in Wellington, Auckland and Tauranga, aims to produce 100 homes a month.
Last week the company made news after it sold 15 townhouses off the plan in Avondale, Auckland's inner west, just 24 hours after they took title to the land.
Managing director Blair Chappell said that with an in-house team of architects, drafts people and quantity surveyors, the company has streamlined its terrace house offerings to five or six floor plans that they can “rinse and repeat” on the sites they buy.
“There’s enough commonality between councils for medium density that we can do that. We’ve got a sales team of 75 people who are also responsible for procuring land, so they know the database, they are door-knocking and most of the sites are not on the market. We’re buying one or two sites per city per month, with three to four projects on the go.”
Three neighbouring properties on Croydon Road, in New Lynn, Auckland, were recently sold to a developer for $6.01m. Photo / Supplied
Chappell said that while house prices have gone up some 30% in the past year, land prices for development are up 50% or more, but concurred with Hurst that just because one property might get a premium price that doesn’t automatically make the rest of the street worth that.
And he’s puzzled how some buyers could make a development work at some of the land prices he’s seeing.
“I don’t know how they did their numbers. Maybe they are just land-banking. It’s hard enough to do a straight-forward development, without adding any fish hooks.”
During alert level 4, Hurst said agents sold a pair of properties on Patteson Ave, Mission Bay for $6.7m, a whopping $4666 per square metre for the 1500sqm site zoned for urban development, and more than $2m over their combined ratings valuation. The two properties, one a 1940s house the other a six-bedroom 1970s, on a desirable corner site, were marketed and sold in less than two weeks after 70 enquiries.
“In a few months [the price] will have moved even more,” Hurst said.
There are good news stories in south and west Auckland too.
Last week Ray White agents Garry Singh and Jarvis Adams broke Manurewa price records when they sold three neighbouring properties on Gloucester Road for $5.4m.
OneRoof records show two of the properties, three- and four-bedroom 1950s rentals owned by brothers, had been bought this January for $1.1m and $1.2m. The third last changed hands eight years ago for $370,000, yielding a profit on paper of $2.73m for the sellers.
Williams Corporation sold 15 townhouses off-the-plan just days after they took title to land in Wingate Street, Avondale. Photo / Supplied
Singh told OneRoof that while the combined ratings valuation of the three properties was just $1.76m, the 2436sqm flat site with apartment zoning was worth more.
“We’d appraised them to sell for $5m, that’s just the norm now. We’d had over 50 enquiries, nine registered bidders and four of them were active. The vendors had done bulk and location studies to show a few options for 21 three-bedroom and three five-bedroom terrace houses.”
He expected the buyer, an experienced developer, to have the houses ready for market within a year.
Across in west Auckland, New Lynn, Harcourts agents Rosie and Daniel Deans sold another trio of neighbouring properties at Croydon Road for $6.01m. The two- and three-bedroom homes, one an original 1910 villa, had a combined ratings valuations of just $2.79m, but together offered 2255sqm of land with urban development zoning, close to a train station and just 2km from Lynnmall.
Harcourts branch manager Richard White said, “This was an incredible result with two developers fighting it out. The vendors were in tears over the phone, this is life-changing money.”
