Off the plan purchases are falling out of favour, with nervous buyers choosing nearly-completed new builds instead, agents have told OneRoof.
David Findlay, who owns Harcourts offices in Auckland's St Heliers and Mount Albert, said that developers were finding it hard to sell properties that were a year or more away from completion. “It’s really splitting out the market,” he said.
Findlay cited the fortunes of two developments on Triangle Road, in Massey, not far from the Westgate shopping centre in West Auckland.
One, a development of seven two-bedroom terrace homes that was 12 months away from completion, was struggling to find buyers, even though the houses have an asking price of $779,000. However, a completed development on the same road sold out within four weeks even though the asking price on the homes was $870,000.
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A new townhouse on Triangle Road, in Massey, West Auckland. The property quickly found a buyer. Photo / Supplied
“Buyers didn’t want to wait that long, even though the off-the-plan homes were $100,000 cheaper.” Findlay said.
He said that buyers were nervous about falling prices, believing that they may be over-paying for a home that was 12 months away from completion.
“Investors and owner-occupiers want their values to hold. Speculators, of course, are counting on prices going up.”
Findlay estimated that about one in three developers were getting their projects off the ground, with many struggling with pre-sales. That meant only half of the record numbers of homes being consented through council were actually getting built, he said.
Savvy developers are changing marketing tack, though.
Harcourts agents Aman Gulia and Joe Steel point to the recent $2.4m sale of an ex-state house on Moa Road, in Point Chevalier. “Developers thinking of doing terrace houses on the 673sqm site couldn’t make those numbers work now,” Gulia said.
Developers of neighbourhoods, such as this one in Lawson Creek Street, Massey, are releasing new homes in limited tranches to help entice buyers . Photo / Supplied
“We sat down with the developer to do the numbers to make the site work with bigger standalone town houses - four or possibly five that can sell for higher prices."
Others are creating a sense of urgency by releasing large scale developments of in limited tranches of 10. Findlay said a new neighbourhood in Lawson Creek Street, Massey that just released 35 nearly completed homes sold fifteen in a week, for prices just below $900,000.
“They’re trying to get scarcity, rather than over-supply. They just bring 20 onto the market, then will start stage two with another 42. They’re constantly getting enquiry,” he said.
Developers paid $2.4m for a site in Moa Road, Point Chevalier. Photo / Supplied
Property lawyer Aasha Foley, of iC Law, deals with a lot of lawyers acting for buyers who have purchased off the plan. Many don’t like long delays between contract and move in date. “There’s a risk aversion. If the delay is too long, there’s a feeling of uncertainty in the air," she said.
Foley said this was affecting single home-and-land package buyers too, as their builders can no longer offer the fixed price contracts that banks need to lend. “Those close to completion are selling like hot cakes compared to ones that may be years away," she said.
“Lawyers are concerned at going unconditional."
She said bank delays were also challenge. “Sometimes it’s that the banks can’t meet the 10 working days' notice we give buyers to settle. It’s not because they’ve denied finance. The problem is it takes much longer to get things done,” Foley said.
Colliers’ national director of property development and project marketing Pete Evans told OneRoof that finance wasn't an issue at the upper end of the development market
“Some projects fly in the face of that - when the upper end gets a scarce product that can’t be repeated, and finance isn’t an issue,” Evans said, pointing to the Domain Collection the company is marketing where prices for the 69 Warren and Mahoney-designed apartments top out at $8.5m.
Prices start at $1.5m for the luxury flats opposite Auckland’s Domain between Parnell and Newmarket, but Evans said the biggest share of sales are for apartments over $3m.
Buyers of upscale developments, such as Domain Collection by Auckland Domain, prefer longer settlements to give a better market to sell their family home. Photo / Supplied
The part new build, part office retrofit is expected to be ready for occupancy in late 2024 – but that’s a good thing for upper end buyers, he said.
“They will be selling their own home in a better market in 2024 than now, inflation will have peaked, interest rates too, and we’ll be back in a typical cycle. They still want to buy off the plan now to give themselves two years to get organised.”
He called 2022 "a sorting out year" and that conditions will have changed by 2023, as the supply of completed new builds will have reduced.
By next year he also expects a pause in price rises (after 18% building cost inflation this year), helped by lower prices for development land and contractors sharpening their pencils as they compete for the more limited volume of work.
“Today, with record consents, about 50% will not be built.”
The unknown, Evans said, is whether New Zealand’s population will start to grow again, or whether Kiwis heading overseas for better money will outweigh immigrants coming in.
