A tired three-bedroom home in South Auckland doubled in price in just over a year after selling under the hammer this week for $1.585m.
The listing agent for the house on Franklyne Road, in Otara, told OneRoof that the property had attracted a lot of attention, with around eight experienced developers registering to bid at the auction on Tuesday.
It was one of 10 properties that sold on the night, for a total of more than $9 million, in a further sign that the post-Covid land grab is putting upwards pressure on prices in previously affordable suburbs.
The Franklyne Road house, which had a 2017 CV of $550,000, sits on a 986sqm section zoned for terrace houses and apartments.
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The vendor bought it in May last year for $800,000 and had since secured resource and building consents for five terrace homes on the site.
Ray White agent Karlen Athnaeil, who marketed the property with colleague Rubal Singh, said the the vendor had planned to complete the project himself “but due to the price of development rising he decided selling would be the best option for him”.
The house on Franklyne Road in Otara, surrounded by new terrace houses, was sold with plans for five homes. Photo / Supplied
She said that some bidders at the auction “already have a few projects underway, so were interested in finishing this one. The six-month settlement gives them time to release their finances.”
She added: “The Otara market is growing every day, a lot more properties are starting to sell for over $1 million.
“[But] this is definitely the highest price in Otara for something like this - there is nothing similar or comparable.”
New data from OneRoof show Otara’s average property value has shot up 34% in the past year to $841,000, while neighbouring by Manurewa has seen its average property value grow 35% to $939,000.
Neighbouring five-bedroom townhouses sold for between $750,000 and $840,000 last year. Photo / Supplied
Athnaeil said that were a number of developments on Franklyne Road, with five townhouses on the site next door selling 12 months ago for $750,000 to $840,000.
Singh said that the buyer was an experienced builder for whom he had sold a series of five-bedroom town houses on Thompson Terrace, in Manurewa, at the end of last year for mid-$800,000s.
“Now you’d be looking at $900,000 to $1m [for the same homes]. $1m is nothing now. When I first started nine years ago, you’d go ‘wow man’ at $500,000.”
He told OneRoof that speculation was growing in the market, but that adding consents to a property before re-selling opened up the market considerably, as builders were keen buy shovel-ready packages.
Townhouses built by the Franklyne Road buyer on Thompson Terrace in Manurewa sold last year for mid-$800,000. Photo / Supplied
Singh recently sold two Mangere East properties with the consent work done – one in Buckland Road for $1.649m in March, the other in Royton Road for $1.5m in July - are already underway.
Ray White Manukau business co-owner Tom Rawson said that the rise in speculators packaging up deals started to take off when the new tenancy rules meant a property needed 90-day settlement for vacant possession.
“A lot of traders took the opportunity to add value by getting a resource consent in that time. And then buyers started to ask for six-month settlement, so that means they can get building consents done as well.
Construction of townhouses is underway on Buckland Road, Mangere East where a house with consents sold for $1.649m in March. Photo / Supplied
“Some of them got frustrated by the whole thing or saw the building process as pretty hard work, so will exit. They’re in and out, the margin is good and it’s a different buyer for the property.”
Rawson said many sellers were surprised at how much they could make without the risk of taking on a build. Even with selling fees, the cost of consents (which may run to $130,000 to $150,000 plus time) and holding costs on finance for the year, he estimated a taxable profit of $500,000 on a property like Franklyne Road.
“And it saves time for the buyer. He can just keep his building crew busy, move straight on to the next project.”
Athnaeil and Singh already had interest in a similar property they’re bringing to auction October 5 at 70 Raglan Street, Mangere East.
A house with subdivision plans is being sold at 70 Raglan Street, Mangere East, a year after it was bought for $800,000. Photo / Supplied
The sellers who bought this as their first home were worried that the $800,000 they paid in September last year for the four-bedroom 1970s house was too much, but realised 655sqm of land with zoning for suburban development and prior approval for a subdivision was a good buy.
“We’ll jump on the market and see how it goes. There’s a longer settlement and a buyer could put a lot more homes on the site, depending on plans,” said Athnaeil.
