74 – 80 Anzac Street, Takapuna was a promising site for apartment development. The developer of the site built two six-level towers containing 92 apartments.
Many of the apartments were pre-sold (ie buyers bought the apartment off the plans). When the project was marketed in 2015, prices were advertised at $395,000 for a 40sq m studio apartmentand $825000 fora 78sq m two-bedroom, two-bathroom penthouse. Some buyers have been asked to pay more than their originally agreed price (at least 8% more than the agreed price in some cases). There is usually a clause in the sales contract that allows the developer to increase the price of the apartment due to unforeseen events or if costs escalate. Purchasing apartments off the plans can give rise to uncertainty of the final price especially in construction market facing labour shortages and rising costs.
However, due to escalating costs, the project has exceeded the budget and the developer has no choice but to go into voluntary administration. This is a major setback for the apartment construction market as another developer gets into financial difficulties. This exhibits how tough the conditions are for apartment developers. The margins are tight and the cash flow can get squeezed by fluctuations in costs.
Luckily for the buyers, the development company had managed to complete building the apartments before going into voluntary administration. The apartments appear to be finished and residents have moved in.
There are still a few unsold apartments and the price is uncertain at this moment.
The downside to buyers who have already purchased the apartments is that the warranty may not be of much value if the developer eventually goes into receivership and worse, liquidation.
Hopefully, the apartment quality is to a high standard and won’t suffer from weathertightness issues which has plagued several apartment projects.