Vendor turns down offer for CBD shoebox that was $40,000 higher than he paid for it in March - aims for $99,000 price gain

The Heritage Farmers building in Auckland.

A $40,000 price gain in four months was not enough for the vendor of an Auckland CBD apartment at this week's City Sales auction.

According to QV.co.nz, the 42 square metre, one bedroom apartment with a car park in the Romano building on Anzac Ave, on the border of the city's university precinct and CBD proper, had been purchased in March this year for $340,000.

When it was put back up for auction this week there were multiple bidders for the unit but bidding stalled at $380,000, which would have provided a price gain of $40,000 in four months.

The vendor obviously believed he could get more and it was passed in for sale by negotiation, but a sale did not eventuate on the day and it was put back on the market with an asking price of $439,000.

Apartments in the Heritage Hotel building on the corner of Wyndham and Hobson Streets continue to sell well and buyers do not seem deterred by the fact they will likely be faced with hefty bills for some major maintenance work over the next year or so.

The historic building which was known to generations of Aucklanders as the Farmers department store, needs a new roof and repairs to its facade and the cost of this work has been estimated at $4 million to $5 million, most of which will likely have to be raised by a special levy on the owners of apartments in the building.

However that did not deter the two telephone bidders for a one bedroom apartment in the building that came up for auction this week, and they were obviously not put off by the fact it was vacant and had body corporate fees and rates costs of $9824 a year. It sold under the hammer for $282,000.

At the same auction, a Remuera house which had some major issues which the auctioneer said could make new owners want to consider demolishing the house and rebuilding on the site, sold for $790,000 compared to its rating valuation of $1.06 million.

The full auction results are listed below:

  • 733/35 Hobson St. Heritage Farmers building. A 50 square metre, fully furnished, one bedroom unit. Vacant. Sold for $282,000. Rates were $1175 and the body corporate levy $8650. According to QV.co.nz the unit last sold for $236,000 in July 2011. The agent was Georgia Featherstone.
  • 1H/75 Anzac Ave. Romano building. A 42 square metre, fully furnished, one bedroom unit, with a car park and storage unit on a separate title. Vacant. Passed in with a highest bid of $380,000. Rates were $1212 and the body corporate levy $5700. According to QV.co.nz the unit had been purchased in March 2015 for $340,000. The agent was Habeeeb Urrahman.
  • 203/11 Union St. Harbour Green building. A 41 square metre, two bedroom, fully furnished unit with a car park and a separate building manager's office. Vacant. Sold for $385,000. Rates were $1310 and the body corporate levy $5184. According to QV.co.nz the units was previously sold for $470,000 in 2007. The agent was Steve Kirk.
  • 149/6 Dockside Lane. The Docks building. A 30 square metre, studio. Vacant. Leasehold. Rates were $1088 and the body corporate levy $3378. Sold for $135,000. According to QV.co.nz the unit was purchased in 2006 for $246,000. The agent was Georgia Featherstone
  • 3/17 Ascot Ave, Remuera. A three bedroom, three bathroom house, offered on an "as is, where is" basis. Vacant. Sold for $790,000. According to QV.co.nz the property had been purchased for $730,000 in 2013. The agent was Gene Lim.

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20 Comments

This is pure speculative activity ............ and the profit is taxable under current legislation .......without question .

Anyone buying and almost immediately flicking property such as this should be well aware of his tax obligations

Should be well aware .. or do you mean .. would be well aware .. could be .. might be .. who cares?

Noticed yesterday .. promo in China advertising the benefits of buying property in Auckland

No capital gains tax .. no stamp duty .. and so on

No capital gains tax .. no stamp duty .. and so on

False advertising. What it should say presently is:

No capital gains tax, unless you are a New Zealand resident .. no stamp duty .. and so on

Could you explain that please Kate - why would the incoming capital gains tax not apply to foreign buyers?

Incoming being the operative word. Or, to put it the other way, not the case now or in the past.

And what pray tell will be the success of the government's "incoming" legislative plan? SC submissions suggest it's 'messy'.

Right, thanks. So it's unlikely to have much of an effect.

Man, it's such a difficult decision for young Aucklanders - feels like such a gamble! We have the money for a deposit and most people say to jump in, but redundancies were announced at our workplace yesterday - things are changing quickly...

I'm guessing that if AKL house prices are to decline, the main trigger will be local job losses - and the resultant mortgage stress that puts many owners under. At my son's employer about 50 positions were transferred from WGN to AKL about a year ago. He understands over half of those that moved have resigned inside that first year. I'd say many people just couldn't make the transition, either financially or lifestyle-wise. Commutes into the CBD were too long/intolerable, traffic abysmal and even if going that long distance out from the CBD, house prices in comparison to WGN are much higher.

For these reasons, I'm guessing that a lot of AKLers made redundant are likely to transition out of the region in looking for new work. Which, were that the case will put downwards pressure on house prices and rents.

I'd say the contraction in prices isn't 6 months away - and interest rates are headed down.

My guess, wait for the contraction as house prices have peaked. But, like everyone, mine too is just a guess.

Regards the effect of the legislation - it will have an effect on house price rises - even if it doesn't solve the issue of direct foreign investment in local real estate. There is the new "bright line" test to be introduced by IRD coming in which will dampen out-and-out speculation, which I suspect has been rife. Landlords (as opposed to speculators) too are losing interest in AKL at these prices as the yield is weak/poor. So they are another class of purchaser that will be withdrawing from present frenzied competition. Additionally, I suspect the massive flow of money laundered recently out of China is slowing as well, as the PRC government ups its enforcement measures in that regard (and puts more pressure on other states to combat it).

Point being, regardless of the merits or otherwise of the government's 1 October legislation, I predict a contraction in AKL prices.

Same caveat as above though.

Wow, that's so nice of you! I won't hold you to any of that, but it's really refreshing to hear from someone who understands economics and doesn't have a personal interest.

I think we'll sit tight for now but if things don't improve within a year then we'll probably move to Australia. I know house prices are crazy there too but I could earn 25-30% more in Sydney and we could take savings made there to regional NZ or Victoria.

Have a good weekend!

If you don't have kids (or your kids are under three), I'd say wait. It will take a good three to five years for the market to correct, once the correction finally starts, so if you have kids who won't want to move then I guess hold your nose and jump in. Aucklanders are delusional about house prices but markets always correct in the long run and currently prices are completely out of line with both incomes and rents. In the very long run the median person must be able to afford the median house or there won't be anyone to buy (or rental yields will be uneconomic). Here a graph that gives some perspective on the very long term view:
https://hotelivory.wordpress.com/2010/08/29/a-very-long-view-on-house-pr...
Good luck!

avatar ... many thks for the link...

But, but, my mates who vote National say it will go up by 15% a year for ever! ;-)

Thanks for the link!

They might be right for longer than you think, riding on a tidal wave of foreign money and immigrants

I am sure the real estate agents and off shore buyers have worked out how to get around these small impediments. Cash talks and from my limited experience with certain buyers and business people paying tax is not high on the list of priorities.

Staggering ... $40,000 on $340,000 in 4 months is a 35% return on capital on an annual basis - pretty good return in anyone's language - and they turned their nose up at it - fool

...return at this point is negative. Auction would have cost $10k or whatever. Next time it will cost the same..Don't count your eggs .......

Quite true only more so.
Typical RE fees would be (it does vary) 5% on the first $300K ($15,000) plus 2.5% on the balance ($2,000) auctioneers fee $500? plus advertising and legal $2,000+. Say $20K in round figures plus GST = $23,000.
These property speculators are doing it hard, that's only a lousy $17K profit for three months hard work; and it's taxable!

Will go for $425k by start of next Uni year in Jan 2016.

Why on Earth would anyone engage an agent on such a basic sale? Selling an apartment in Auckland right now is easier than selling a lawn mower on TradeMe. I think they'll regret waiting.

Because they are LAZY, the very reason they are trying to make a fast buck in the first place. A monkey could sell real estate at the moment, I sold my Dads place back in April and didn't even need to advertise it, saved about $30K in fees. Put it on trade me and get the buyers lining up at the door but you have to do some work for it.