Apartment price shocks sting buyers
Apartment cost increases can kick people off property ladder
H eat i s building in the apartment industry as developers hike off- theplan prices, even if buyers desperate to get on the property ladder have a contract.
Buyers say they often cannot afford the new prices. But cancelling means they have lost months, sometimes years, waiting for the dream of home ownership.
At the St James Suites planned for Queen St, a buyer who in 2014 signed a contract to pay $ 775,000 was stunned last week when that figure escalated to $ 999,000 for exactly the same t wo- bedroom place.
Across in Takapuna, one buyer at The Sargeson apartment project told how the price of a unit was rising from $ 465,000 to $ 535,000, while at Rose Gardens Apartments in Albany, where work is well advanced, buyers were being asked for 15 per cent more. Rising construction costs, funding cost hikes and difficulty getting access to funding are some of the issues being mentioned in letters sent to buyers, citing clauses which allow changes, offering to cancel and pay interest on deposits.
Auckland apartment developer Marty Kells said some overseas players were ratcheting up unit prices.
“If developers don’t do their homework, why should buyers who have put their money up have to pay more? It’s becoming the norm . . . It’s not right,” Kells said.
He is about to sign a $ 30 million contract with Fletcher Construction to build new apartments in Anzac Ave and has developed hundreds of new units lately.
Prime Minister John Key has indicated Aucklanders will need to increasingly turn to apartments to get on the property ladder and intensification of the city is widely seen as the way to make better use of pre- cious land. In the next three decades another 400,000 dwellings are needed.
Issues in the apartment sector are so well documented and acknowledged that Housing Minister Nick Smith has officials working on an overhaul of the Unit Titles Act and Building Code.
The findings of that probe are due to be released soon and it is the result of extensive work by Auckland Central MP Nikki Kaye, the Home Owners and Buyers Association and many others, all pushing for reform. But when the report went to officials in the middle of the year, price hikes were yet to hit the sector.
The issues in the industry include apartment pre- purchase disclosure; how to resolve disputes within a body corporate; control of body corporate managers; funds held by a body corporate; and transparency of bodies corporate.
Gordon MacLeod, Ryman Healthcare chief financial officer, also cited apartment issues at the company’s half- year results briefing in Auckland.
Ryman would never sell at one price then demand more later, MacLeod told the briefing.
Apartment buyers are struggling at precisely the time when the Government/ Auckland Council Special Housing Areas plan should have provided thousands of new places.
Phil Eaton, Property Council Auckland branch president and managing director of project managers Greenstone Group, defended apartment price rises, saying developers were justified in asking for extra.
Price rise potential was clearly in contracts and developers were allowed to seek more, Eaton said, or even cancel projects that didn’t stack up. Price rises had hit only a few out of 200 planned Auckland apartment projects, he stressed.
“Very few developers are asking for more, compared to the number of developments,” Eaton said, citing Auckland construction volumes and this month’s RLB Crane Index which found 64 cranes on the city’s skyline, compared to about 40 in Los Angeles and about 28 in New York City.
“It’s reached fever- pitch. People should not be surprised by price rises,” Eaton said.
“It’s likely there will be more developers asking for more money from depositors,” he said.
“Developers are producing new product and new places from Milford through to Hobsonville Point, Mangere, Onehunga, Flat Bush. They’re taking risks buying land, putting units on the market. They don’t always get the pricing right so they need to be able to change it according to when the market changes,” said the property expert, whose firm has worked on projects including Sugar Tree, Hobsonville Point’s Brickworks and Browns Bay’s Norfolk Apartments.
Robin Lee, deputy manager of the $ 300m, 800- unit Rose Gardens Apartments project, now well advanced at Albany, said more money was needed to cover rising construction costs. Meanwhile, at The Sargeson in Takapuna, developer Auburn “has analysed the project and has concluded that in order to proceed, the apartment sale prices need to be increased by 8 per cent”.
Steve Bielby, involved in the St James Suites project, said local buyers who had paid 10 per cent deposits were now being asked for 20 per cent and foreign buyers who had put down 20 per cent were now being asked for 30 per cent.
Helen O’Sullivan, chief executive of apartment developer Ockham, bristled at the spectre of price rises.
“We definitely do not increase the price of properties once sold. If a buyer has an unconditional contract with us and has paid a deposit, that’s the price,” O’Sullivan said.
Herald readers reported price rises at other projects, including one in Kingsland.
Buyers at the 91- unit Flo Apartments in Avondale didn’t get the chance to pay more. The contracts were simply cancelled.
“So much for a signed contract between vendor and purchaser,” said one gutted buyer.