One of Auckland’s leading property developers is offering sweeteners to buyers in a bid to shift unsold apartments in its latest project.
Ockham has announced new financial assistance packages for buyers at its new Manaaki apartment development in Onehunga.
The sweeteners, which it said would be paid on settlement, include $10,000 cashback for one-bedroom purchases, $15,000 for two-bedroom apartments, and $20,000 for three-bedrooms.
The money could assist with legal costs, moving costs, furnishing costs and rates and body corporate fees, Ockham said in a newsletter sent out this week.
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Ockham has around 40 apartments left to sell at Manaaki, and an undisclosed number of unsold apartments at two other high-profile projects: The Greenhouse, in Ponsonby, and Toi, in Point Chevalier.
Prices at Manaaki start at $670,000 for one-bedroom apartments. Two-bedroom units are priced from $795,000 and three bedrooms start at $895,000.
The developer, which has previously sold off-the-plan projects with ease, has flagged difficulties in the wider apartment market. Last year, it cancelled a 165-unit project on Great North Road and hit pause on other future projects.
Ockham co-founder Mark Todd told OneRoof that the company could afford to rent out the remaining apartments in the building. It made more sense to sell them and use the proceeds to move forward on new projects, he said.
Ockham Residential co-founder Mark Todd says apartment sales are slow. Photo / Michael Craig
“We would dearly love to move those last 40 apartments, and this is an incentive to do so. Sales are slow [and] it’s us sharing a bit of the pain, because obviously it comes out of our bottom line at the end of the day,” Todd said.
“[The package] is aimed at people that are on the cusp or on the bubble of being able to afford housing. It makes a difference if we chip in the money to pay body corporate fees or moving costs or move in, furnishing costs, legal costs. It makes a difference in your homeownership costs over that first one or two years.”
Todd said buyers were waiting for prices to fall, but developers couldn’t afford to build for less. “There’s an arm-wrestle going on. I can’t build without sales, and we as a group have capital tied up in existing stock. On the other hand, many, many families are struggling to afford houses because of the cost of owning houses. And so we’re offering assistance of some note.”
The package only applies to Manaaki. The majority of buyers moved in late last year and the development was buzzing, Todd said. Greenhouse was also only around 80% sold, and the Toi building still had around 75% of units to sell.
Todd said it was a timing issue that Manaaki hadn’t sold out. “That was the last building to launch. It missed the market in that respect. And it’s a big project. It’s the largest suburban block built in New Zealand.”
Ockham's Greenhouse development on Williamson Avenue, in Ponsonby, Auckland. The building was officially opened this month. Photo / Sylvie Whinray
Todd said the slump in the wider housing market was inevitable.
“It was totally irrational to have a 40% price increase from the beginning of the pandemic to July 2021, when the market peaked. It was nuts. It was fuelled by a lot of poor policy decisions and good old-fashioned human greed,” he said.
“As a developer, that hasn’t been helpful. Sure we sold a lot of apartments, but on the back of that in 2022, construction cost inflation ran at 17%. No one’s better off with the house price escalation that we had. So this reckoning that the industry’s been experiencing the last two and a half years, was needed and it was long overdue.”
Todd said he also needed to respect the 170 owners who had already bought units over the past two years. “These people have purchased and been very trusting and settled these 170 units in the last two years. It is a good quality development and I’m not going to do anything to undermine the value of the $130 million of apartments that have already been sold out at Manaaki, as a respect to those existing purchasers.”
Bayleys head of insights Chris Farhi said financial assistance packages such as Ockham is offering were not uncommon, but he noted that there were drawbacks to sales incentives and discounts.
Early buyers who take a risk buying off-the-plan were unlikely to welcome the idea that apartments in their development were selling for less than what they paid. And once a developer is seen to be discounting, future buyers might expect the same.
Bayleys head of insights Chris Farhi says discounting on apartments can have an adverse effect on future developments. Photo / Fiona Goodall
Suzie Wigglesworth, national director of projects at Bayleys, said discounting was “one of those things that often rears its head when the market is tough”.
Wigglesworth said Ockham’s package amounted to a discount on purchase, rather than a financing package. “Ultimately that’s just a discount at the end of the day. It’s just an incentive to get people to buy. [Another developer] might offer an electric e-bike or a half-priced car park or a free whiteware package.”
Current market conditions for new-build apartments were hard for developers because buyers seemed to be more reluctant to purchase off-the-plan developments. “If the development is well under construction or within a six-month time frame of completion, then buyers are really engaging with that,” she said.
“We are seeing good buyer activity [in that case]. But they won’t engage with product unless it’s close to completion.”
Higher interest rates were also having an impact. “The challenge with a lot of the first-time apartment product isn’t price, it’s a buyer’s ability to service the mortgage.
“In the past they may have been able to afford a home at $750,000. But with the interest rates being what they are, their loans are down to maybe $650,000. That is what’s preventing them from moving forward.”
Wigglesworth said that first-home buyers were still buying at Elevation Northcote Apartments, where the build was nearing completion. The modular apartments, pre-built in Vietnam, are selling from $604,000. “We are signing three or four contracts a week,” she said.
There are other ways to crack the same nut if sales are slow. Norman Markgraaff, a Ray White agent and new home sales consultant for Generation Homes, said the home builder would soon be offering a rent-to-buy scheme for first-home buyers, who can’t otherwise get a mortgage.
“We are bringing on, later in the year, a rent-to-buy [scheme]. We would finance the house and they would rent it from us with a deal that as soon as they reach a certain milestone [in savings] they can buy it at a fixed price.
“They would put down a deposit. A nominal amount, maybe 5%. We would charge you rent of say $700 a week, but you can afford $900 a week. Two hundred a week will go into your savings account. You build that up until you get sufficient deposit so the home is affordable [to qualify for a mortgage].”
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