In a hot Auckland housing market, modest South Auckland homes on development sites are regularly fetching more than $1 million at auction.
For some vendors, the amounts yielded at auction are life-changing. But with prices rising everywhere where are they parking their profits?
READ MORE: Find out if your suburb is rising or falling
Ray White agent Pat Lapalapa says the big sums being paid at auction in formerly affordable areas have allowed vendors to climb several rungs up the property ladder.
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Lapalapa cites the recent sale of a modest three-bedroom house in Manurewa East he first sold to first home buyers for $590,000 almost two years ago. The house was snapped up in February for $900,000 – a gain of more than $300,000, which the vendors used to purchase a modern four-bedroom house close to the water in nearby Wattle Downs for $1.195 million this week.
“That’s a massive gain, probably one of the biggest I’ve seen in less than two years. The vendors really upgraded in a short period of time.”
The sellers upgraded to a four-bedroom modern home nearby Wattle Downs. Photo / Supplied
Ray White Manukau director Tom Rawson says there are families in South Auckland who will have lived in the same house for 30 years. Often these homes are on large sections zoned for intensive development, so the capital gain available to them is significant.
"From all that capital from the house they are rich, but they need somewhere to live at the same time," Rawson says, adding that sellers typically opt for longer settlement periods to give them enough time to find a new home.
The sale of a family home will usually lead to more transactions, he says.
“They are not pocketing the money; they are upgrading quality of living and one big land sale can generate two or three transactions because the parents will help their children get a house and upgrade the property type from a three-bedroom 1970s home to a 2020 home,” he says.
“The kids and the whole family contribute to mortgage payments. It’s very different from the St Heliers of this world.”
Often parents move in with their children once they sell, with the children preferring to buy a home and income property that can accommodate extended family members.
Both Rawson and Lapalapa note that South Aucklanders tend to stay local and invest any capital gain they have made into a newer house in their neighbourhood.
Lapalapa says: “Before Covid, sellers in South Auckland were either moving to the islands or Australia or upsizing but in the last sales I’ve done the sellers passed the money to their kids to help them buy a house and upgrade.”
