Developer expects to see more failed developments and mortgagee auctions
An Auckland development of 15 townhouses has been listed for a mortgagee auction on April 20.
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The TradeMe advertisement for the auction of the Sunnynook Central development in Totara Vale is now looking for a developer to take over and finish the project, but existing buyers of the terrace townhouses seemed to have been surprised by the move.
George Fong, Barfoot and Thompson salesman, said a financier of the boutique development had initiated the mortgagee auction after the developer, Sunnynook Central LP, was unable to make repayments, Stuff reported.
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The Barfoot and Thompson sale site for the development suggested 10 of the 15 townhouses had already been sold.
Fong said after the listing appeared, one buyer in the development called him asking what had happened.
Salesman Jeremy Mi said he was not sure how many of the townhouses had been sold and that he has “no idea what’s going on” at the development.
When asked if the buyers would get their deposits back, Mi said he didn’t know.
“I tried to contact the vendor and no response, so I can’t tell you anything,” he told Stuff.
David Whitburn, Auckland property developer and former president of the Auckland Property Investors Association, said more developments would likely be put up for a mortgagee sale due to cost increases, delays on building materials, and tighter lending pushing down prices.
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Whitburn said a general pull-back of Chinese lenders in the development space might have caused the issues at Sunnynook Central. It was likely the developer bought the site for a high price at the peak of the last property cycle, and now found it difficult to recoup the cost due to increasing cost of materials, credit tightening due to LVR restrictions, and stricter lending rules.
Title records showed Sunnynook Central bought the property in mid-2018.
“I never like seeing anyone fail, but there are plenty of reasons for it, unfortunately,” Whitburn told Stuff.
Mortgagee sales had been rare in recent times, but Whitburn expected to see more.
“I think some of them will be from the builders doing what I call spec homes – that’s homes where they don't have a buyer for them, or it’s not a contract build where they’re building on behalf of someone,” Whitburn said. “They’ve taken the risk to buy the land then get the building done in the hope that they’ll sell it at a great profit. With the difficulties in getting some cladding types and gib boards, those dreams are getting pushed out and holdings costs unfortunately are still charged, so there’s some pressure.”
Whitburn didn’t expect a wave of mortgagee sales to happen as there were many controls in place to ensure developers ran their numbers on projects and there were many keen buyers still in the market, Stuff reported.
