An Auckland property developer forced onto a third-tier lender and hit with double-digit interest rates is under such intense financial pressure that he's willing to sell one of his new builds for as little as $1.
Harcourts agent Harsh Kathuria said his vendor was “bleeding” and wanted all five of his properties in Māngere East sold by the end of November.
“He needs all of them gone. He’s not saying [why it had to be that date], but he’s on a strict deadline.”
Kathuria's client is not the only developer feeling the squeeze. In Point England, four townhouses have hit the market as mortgagee sales, while in West Auckland, a developer is offering buyers the chance to win the cost of their mortgage in a bid to drum up business.
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Kathuria said his vendor had chosen to run a $1 reserve auction for his three-bedroom standalone house at 449C Massey Road, in Māngere East, to show how motivated he was.
He noted that whatever the property sold for would be the reserve for the remaining four houses in the development.
The developer, who completed the homes in May, had tried to sell one of them for close to $800,000 but didn't get any bites.
The South Auckland developer needs to sell five houses on Massey Street by the end of November. Photo / Supplied
The homes were completed in May and have three bedrooms, two bathrooms and two lounges. Photo / Supplied
At the same time, he had shifted from a second-tier lender to a third-tier lender and was now struggling to pay the high interest rate.
Although he thought he might be able to rent the properties out until the market improved, the lender told him to "sell it or we will”.
“He put them out for rent because he thought he could manage, but the lender is saying, ‘No, we don’t care,'" Kathuria said.
His vendor had significantly lowered his expectations. “We’ve told him CVs have no relevance in your situation.”
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The developer has already sold three apartments in a separate development on Caspar Road, in Papatoetoe, for bargain prices.
He took one of his Caspar Road apartments to auction with a $1 reserve and ended up selling it 68 bids later for $570,000 – below the RV of $790,000. The remaining two townhouses in the same block were called immediately after and sold under the hammer for $580,000 and $588,000, to buyers who had missed out on the first property. Two of the buyers were investors, and one was a flipper, who relisted it for sale a month later and is still looking for a buyer.
The developer had hoped selling the Caspar Road properties would take the pressure off. “The reality of the situation for this guy is that he has to count his losses and move on. He can’t do a pity party. It’s time to get out of the jam.”
Four townhouses on Erima Place, in Auckland's Point England, are being sold by way of mortgagee tender. Photo / Supplied
The developer of The Vines estate in Auckland's Swanson is offering buyers a chance to win back the cost of their home. Photo / Supplied
Also under pressure is the developer of four modern townhouses in a block of seven in Point England. The lender is now forcing the sale of the properties on Erima Avenue, with Harcourts listing agent Aman Gulia telling OneRoof that the developer had been reportedly caught short after construction times blew out and the market dropped.
“That’s basically what has happened with most developers. The project takes longer than what they expected, and they are not getting the price they would have expected a couple of years ago.”
The developer had managed to sell three townhouses for $733,000, $900,000 and $1m respectively before the lender stepped in.
Gulia declined to give a price indication for his four townhouses. “It could sell for $500,000; it could sell for $700,000 – we don’t know. It depends on what someone is willing to pay for it.”
Meanwhile, Gemscott, the developer of Vines Estate in Swanson, is also trying to make its new townhouses stand out by running a competition giving buyers the chance to win the cost of their home. Gemscott has already given a two-bedroom townhouse worth $679,000 away and is now running a second competition for those who purchase one of its 15 three-bedroom townhouses valued at around $769,000.
Gulia, who has the listings, said the market was tough, so just like banks were offering cashbacks to new customers, developers were also coming up with ways to get ahead of the competition and win new business.
- 449C Massey Road, in Māngere East, Auckland goes to auction on October 20 with a $1 reserve
