'Flood of cheap flats' as values fall

Auckland's inner-city property market is about to be flooded with up to 1000 cheap apartments, with distressed owners having to sell for half the amount they paid little more than two years ago, a real estate agent warns.

Real estate advertisements declaring "city steal ... vendor quits", "downtown waterfront suite abandoned", "vacant and abandoned" and "mortgagee wants this gone" indicate the state of the market.

CitySales apartment broker Martin Dunn predicted the owners of many newly completed city apartments would not be able to meet their coming settlement dates. Those apartments would ultimately fall into the hands of the banks and be put up for auction.

Apartment blocks Barclays, Stadium, Icon, Bianco and Chatham have all just been or are about to be completed. The Eclipse is due to open in about six months.

Most were sold "off the drawing board" through marketing companies including the collapsed Blue Chip group before the property crash, Mr Dunn said.

Owners who had paid only a deposit were now due to settle, but up-to-date valuations had, in many cases, halved their values.

With banks unprepared to lend the full amount, owners were having to walk away and let their properties be sold by mortgagee auction and have the developers' banks sue them for the balance.

Many would have to sell their family homes or other assets to meet their commitments, he said.

Mortgage broker Sue Tierney said it was much harder to get a mortgage on an apartment now than it was two years ago.

But there were plenty of bargains out there for those with cash or good equity in other properties.

"The banks are being very, very cautious," she said. "They are pessimists, they believe the prices are going to fall even further."

Mr Dunn said an inner-city apartment that sold off the drawing board for $750,000 several years ago was likely to fetch just $200,000 today.

The owner of a deluxe two-bedroom apartment near Auckland's Vector Arena had put the property up for auction with a reserve of less than $200,000, despite having paid $530,000.

Another had a reserve of under $100,000.

Fifty Blue Chip victims, who bought 90 Bianco apartments, lodged an injunction in the High Court at Auckland yesterday, seeking to stop the release of their deposits to the developer.

Similar proceedings are under way for about 50 investors who want to cancel contracts for about 60 apartments in the Barclay building on Albert St.

Mr Dunn said the six apartment blocks would be the last to be built in Auckland for the next five to 10 years.

- © Fairfax NZ News