Special Housing apartment bargains

Auckland first home buyers may be able to pick up a bargainas developers struggle to sell units they were required to build under thecity’s former affordable housing scheme.

One developer has even offered apartments at a $50,000 discount in order to attract buyers.

The Special Housing Area (SHA) scheme ran from 2013 to 2016 and was an interim measure to kickstart housing construction until Auckland passed its new Unitary Plan. Part of the criteria was that 10 per cent of a development had to be “affordable” housing, defined depending on the size and timing of the project.

But meeting the SHA affordability requirements is proving too much for many purchasers.

One of the biggest sticking points is that they must sign a statutory declaration saying they will live in the home for at least three years.

Andrew Lamont, director of Lamont and Co which is building the 240-unit Fabric complex in Onehunga, says it’s sold other one-bedroom apartments in the development for around $600,000 to $650,000.

But when it came to the SHA apartments which were capped at $615,000, “we found that first home buyer market, in order for them to commit to the requirements of signing the statutory declaration, we had to make things a bit sweeter for them”.

That sweetener came in the form of a $50,000 discount, and at the time of writing all but one of the SHA apartments in the 160-unit first stage of Fabric had sold. The second stage with 80 apartments will also have an SHA component.

“Those people who have bought those apartments have done really well,” Lamont says.

Helen O’Sullivan, chief executive of developer OckhamResidential, also says the affordable apartments in the three SHA developments thecompany currently has underway have been harder to shift.

Getting in under the income threshold of 90 per cent of theAuckland household median, and having to commit to three years living in theproperty placed significant constraints on people.

“The complication for us particularly selling off the planswas, we started 18 months ago. So someone who bought that SHA apartment had tosign a declaration saying ‘right, now, 18 months before I move in I plan tolive in it for three years’.”

Ockham aims to design its complexes so that it can sellthem at an affordable price point, and so it is constructing more of theSHA-style units than it’s required to, she says.

For example, its Daisy development in Mt Eden had to have threeSHA apartments at $461,000 but Ockham developed nine. “People naturally wantedthe six where they didn’t have to sign the form,” she says.

The SHA scheme had its flaws, and she would like to seemore focus on finding ways to encourage the market to provide affordablehousing rather than dictating to it, she says.

However, another Auckland scheme offering reasonably pricedhomes does not appear to have trouble attracting interest.

The Axis Series administered by HLC, a Housing New Zealandsubsidiary, provides affordable houses at the large Hobsonville Pointredevelopment in Auckland’s west. Like the SHA scheme purchasers must be firsthome buyers and they must commit to living there for a certain period – inAxis’ case it’s two years. There are also income caps: $85,000 for a singleperson and $130,000 for a couple. The homes sell for under $650,000.

Twenty per cent of Hobsonville properties must be part ofthe Axis Series, which will eventually result in a total of around 870affordable homes.

Axis properties are smaller than other homes at thedevelopment but they range from one-bedroom apartments up to two and threebedroom semi-detached and standalone houses. This has proved popular. Under thescheme the homes are sold in a ballot system, and three-bedroom properties canattract bids from more than 100 hopeful buyers.

The same Housing New Zealand team which processes theKiwiSaver HomeStart grants and Welcome Home Loan scheme also administers Axis,including conducting the ballots. Around half of Axis customers also access theHomeStart grant. “It’s a more streamlined process for everyone, it’s one placethat the purchaser knows to go to, to get all their paperwork done,” HLC programmemanager Ingrid Arnestedt says.

But buyers must still run the gauntlet of the banks, David Windler,director of the Mortgage Supply Company, says. Despite the official approvals andthe fact that homes sold under these schemes are new builds and exempt from theReserve Bank’s LVR restrictions, the banks’ lending criteria is currently sotight that buyers without a 20 per cent deposit would struggle to get funding.

“You try and get (a) 90 per cent (loan) on an Axis home –it’s just about impossible,” Windler says. “Here you’ve got somethingspecifically designed to meet first home buyer needs that is almostnon-fundable for the sort of buyer that’s likely to pick it up.”

Arnestedt says anecdotally Axis understands the banks havetightened their lending criteria but it’s not aware of a direct impact on itshomes. Glen Saunders, product manager lending for Kiwibank which offers theWelcome Home loan scheme, says as long as the property and the borrower meetthe criteria it is possible to get a 90 per cent loan under the scheme.