There were plenty of potential buyers but not many sales at the latest Auckland apartment auctions

There were plenty of potential buyers but not many sales at the latest Auckland apartment auctions
The Lighter Quay apartments at Viaduct Harbour

There was plenty to choose from at the latest Auckland apartment auctions and although there were plenty of buyers in attendance, they remained extremely cautious and only around a quarter of the apartments on offer were sold under the hammer with most of those were leasehold.

The City Sales auction got off to a flying start with two apartments in the Lighter Quay complex on Viaduct Harbour headlining the Order of Sale.

The apartments in the Lighter Quay Building are all on leasehold titles. Despite this there were multiple bidders for both units and both sold under the hammer.

However the vendors took a hit on price with both units selling for well under their original purchase prices.

The first unit was a 36 square metre, one bedroom unit which sold for $145,000 compared to its 2006 purchase price of $335,000. The second unit with two bedrooms, two bathrooms and a floor area of 61 square metres, sold for $170,000 compared to its 2006 purchase price of $485,000.

However bidding was more subdued on the remaining 10 units on offer, with only two selling under the hammer and no bids received on five of the others.

The two that sold were a leasehold unit in The Landings Building near the historic former Central Railway Station, and a unit in a complex on Augustus Terrace in Parnell.

The unit in The Landings sold for $170,000 compared to its 2005 purchase price of $270,000. The Parnell unit, which had building maintenance issues, sold for $210,500.

Although a sales history wasn't available for the Parnell unit it had a 2017 rating valuation of $730,000.

That brought total sales under the hammer to four with the remaining eight passed in.

Bidding was also restrained at Ray White City Apartments' auction where just three units were offered.

Although all attracted bids with two of them attracting multiple bids, all were passed in.

A feature of the current Auckland apartment market is the high number of newly completed apartments coming on to the market.

These were usually bought off the plans two to four years ago, often by foreign buyers, with the expectation of reselling them for a handy capital gain when they were completed.

But between them signing their contracts and the buildings being completed, the market has softened and many are now selling at a loss.

And even those owners who sell for near their original purchase price are left significantly out of pocket once agency commissions and other costs are deducted.

At the latest apartment auctions three apartments from the newly completed The SugarTree Altro complex in Nelson Street on the fringe of the CBD, and another in the newly completed Union & Co. Building just around the corner, were put under the hammer. All were passed in.

Details of all the properties offered at both the Ray White and City Sales auctions are available on our Residential Auction Results page.

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12 Comments

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No % today then ?

I wonder if the SugarTree apartments were put up for auction by the developer. If so it's a bit of a concern, could be more sign of funding issues affecting the developers of these new blocks.

1) Developers selling unsold units at lower prices due to funding stress.
2) Add to that off the plan buyers who purchased for capital gain who are also looking to sell

Looks like a lot of potential active supply coming onto the market.

Given that vendor asking prices are not being met by potential active buyers, suggests little active demand at current price levels.

If vendors need to sell, then they will have to lower the price that they are willing to accept. There is clearly a buyers market here, despite the reported underlying shortage of housing in Auckland of 40,000 dwellings.

This anecdotal evidence could indicate that the number of sellers experiencing a loss (even before deducting for selling costs and commissions) is increasing. The most recent Pain and Gain report showed roughly 15% of apartment transactions nationwide were sold at a loss.

This was interesting from above:
"A feature of the current Auckland apartment market is the high number of newly completed apartments coming on to the market.

These were usually bought off the plans two to four years ago, often by foreign buyers, with the expectation of reselling them for a handy capital gain when they were completed.

But between them signing their contracts and the buildings being completed, the market has softened and many are now selling at a loss.

And even those owners who sell for near their original purchase price are left significantly out of pocket once agency commissions and other costs are deducted."

Fiore Wakefield
57-59 Wakefield St

21 out of the 112 residential apartments are unsold (18.75%)
Some have been listed since December 2018 - about 9 months and still unsold.
Wonder how well the developer is capitalised and how long the developer can wait. Will the developer face any funding stress?

https://www.trademe.co.nz/Browse/CategoryAttributeSearchResults.aspx?sea...

Union & Co Building
15 Union St, City Centre, Auckland

23 properties listed for sale (out of 134 residential units = 17%) Not sure how many of these listed for sale are by off the plan buyers or by the developer.

https://www.trademe.co.nz/Browse/CategoryAttributeSearchResults.aspx?sea...

1) Here is one that has been listed for sale since Nov - that is listed for sale for 10 months

301/15 Union Street, City Centre, Auckland City, Auckland
https://www.trademe.co.nz/property/residential-property-for-sale/auction...

2) Here is one being listed for sale by an off the plan buyer:
2/15 Union Street, City Centre, Auckland City, Auckland
"Offshore investor exits Auckland early.
This apartment must be sold before completion.
Our seller is prepared to sell at a loss. "

https://www.trademe.co.nz/property/residential-property-for-sale/auction...

Another off the plan buyer listing their unit for sale

707/15-17 Union Street, City Centre, Auckland City, Auckland
Property has been completed, vendor wants a Sale!
Freehold brand-new apartment "Union & Co" located at 15-17 Union Street

We will present ALL OFFERS!

https://www.trademe.co.nz/property/residential-property-for-sale/auction...

Apparently there is a lot of apartment completions due in the next 6 months and with investors bailing and prepared to take a loss, there could be a mass exodus and heaven knows what that will do to prices....

The golden goose is now laying copper eggs, pity those that invested in it..

Yep - stay away from apartments.......

Too many drawbacks and insufficient control to sort things out when there's a problem.

TTP

I picture Apartment buyers sitting down with the solicitor as they sign the documents.

"Right, okay, here's the Sale and Purchase agreement I need you to sign up here and initial each page.....cool. Okay, now here's the loan docs. $500k @ 3.79% fixed for 2 years. Sign here, cool. Now here's the....let's call it a "Tenancy Agreement" for the ground rent & body corp of $30k p.a, sign here...cool. Well, good luck!"

For new off the plan purchases, if they're capital gain oriented, then they pay the deposit up at purchase date, then no further payments until settlement.

Their original exit strategy may have been to sell after settlement and not to rent out or to live in it. Here is a woman who seems to have been capital gain oriented and did just that but got caught out with falling prices and then was unable to secure financing. I wonder how many other off the plan buyers are in a similar situation.

https://i.stuff.co.nz/business/114799219/student-battling-to-recover-apa...

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=119...

Remember when these developments were sold off the plan, it was a sellers market, property prices were rising rapidly and there was a fear of missing out. With this environment, long term settlement periods (giving sufficient time for potential capital gains), 10% deposits, no further interim cashflow payments by buyers until settlement, off the plan projects are a highly leveraged method for capital gain speculation in real estate.

If it was a buyers market, the apartment developer would be unable to reach the minimum pre-sale level for financing and the project would not have got started - look at all those canceled apartment development projects canceled in the last 2-3 years (for example, the St James development on Queen Street in Auckland)

Wow those apartments really do seem to be a loss making exercise. Couldn't find much details on them apart from Realestate.co.nz saying that the ones on Halsey Street, titled "Foreign Buyer Bailing".

4A/15 Augustus Terrace, Augustus Terrace in Parnell. Do you know the last purchase prices on this one?
Capital Value: $730k Sold for: $210,500 RV value decline of: -$209,770

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