Homeowners face resale tax in new-build suburbs

- Homeowners in Ara Hills and Kensington Park face a tax of up to 1% when reselling.

- The levies fund infrastructure and community initiatives, as councils reduce funding for parks and reserves.

- Experts suggest this practice may become more common in new developments due to funding challenges.

Homeowners buying into some of the country’s poshest developments face a tax of up to 1% when they go to resell their property.

The concept of taking a transfer levy from vendors to fund future developments is still rare in New Zealand, but agents told OneRoof they believe it will become more common in the coming years as councils pull back on funding parks and reserves.

Homeowners in Ara Hills and Kensington Park, in Ōrewa, north of Auckland, are contractually obliged to hand over some of their profits once they sell on top of an annual levy that goes towards maintaining public spaces in the developments.

Telos Group director Caleb Paterson said the idea of giving away a “considerable chunk of change” did take some getting used to.

He recently had clients looking at buying a home in Ara Hills and said the fact they would have to give 0.5% of their sale price back was initially a deterrent.

Residents in the master-planned community of Kensington Park are charged an annual levy and a resale levy. Photo / Supplied

“It took them a little bit to get their head around. Especially because it’s not common, especially in that marketplace,” he said.

“They just factor it all in as part of the purchase and part of the resale.”

Paterson said the levies were often to do with developers having to self-fund a lot of the infrastructure, especially in new master plan communities.

“As the Government or the council has less money for infrastructure, these might become more and more common as an expectation in the marketplace for new developments.”

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AV Jennings’ New Zealand project director Katelyn Orton, who oversees the Ara Hills development, said people purchasing into the area knew exactly what they were signing up to. They had to pay an annual levy and once they sold, 0.5% of the purchase price would be transferred to the residents’ association.

“It’s a choice and if it’s something that is not attractive to you then you go elsewhere in the catchment.”

Orton said the annual levy went towards maintaining the public spaces including the private Redwood Park within the community, while the additional transfer fee was aimed at establishing a fund to pay for initiatives such as a community centre.

“It’s based on their needs. We can’t predict what our residents will want in five or 10 years. We are only here for the development phase of the project so it’s purely up to the residents to decide how they want to use that money,” she said.

The fund is still in its infancy, with the first residents only moving in 2022. There had been a couple of resales of the 150 completed houses so far, but that number is set to grow as more of the 520 consented houses are built and eventually resold.

Telos Group director Caleb Paterson: "As the Government or the council has less money for infrastructure, these might become more common as an expectation in the marketplace for new developments." Photo / Supplied

It was a similar situation in the more established Kensington Park, which charges residents an annual levy and 1% of the resell price to fund capital expenditure.

Telos Group salesperson Jaimee Durham, who specialises in selling properties in Kensington Park, said it was the first development in the country to take a one-off exit levy.

The park was established 17 years ago and borrowed its constitution from a community in the US and the portion of the sale price was given to the residents’ association to fund capital expenditure.

Durham said some of the money in the fund had been spent on rejuvenating one of the waterways in the development and carrying out landscaping, but there was still a substantial amount left.

A sub-committee was responsible for working out how to best spend the fund. Some ideas included building a community centre, putting in motorhome parking, a tennis court, bigger indoor pool, or an indoor cafe or restaurant.

“The capital expenditure fund kind of just allows us to assure the community that there is funded investment back into their community, protecting their asset, protecting their own values beyond the exterior paint colour of their building ... so that in 20, 30 or 40 years the community still feels fresh and is servicing a modern approach to amenities.”

Like Ara Hills, the fund was on top of the annual levy of about $1000 a year charged by the body corporate for maintaining the area.

Although Kensington Park had no age limit, it did tend to attract more mature residents.

Valocity senior research analyst Wayne Shum: "It’s much more common to just do annual levy charges." Photo / Fiona Goodall

“Higher value entry price point designed for easy living is naturally suited to a more mature demographic. So, we naturally do have a more mature community, but we certainly don’t want to narrow our focus.”

Durham said the 1% transfer levy was completely different to a retirement village where in most cases people did not see any capital gain and often walked away with 30% less than what they paid for their property.

Wayne Shum, senior research analyst at OneRoof’s data partner Valocity, said many newer housing communities such as Hobsonville Point, in Auckland’s west, required residents to pay an annual levy to maintain the shared spaces, but this was the first time he had heard of an association clipping the ticket twice.

Shum said the annual levy charges usually went towards maintaining the driveway or the local playground that council didn’t pay for or enforcing rules around the design and use of the property. “It’s not common to give a part of your purchase price. It’s much more common to just do annual levy charges,” he said.

“They are probably using it as just a different way to raise money. Some people raise it through an annual fee, some people raise it through this.”

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