New town home sales turn a corner

Photo: The Press

Bob the builder: Bob Robertson, above, says Pegasus sales suffered over the past year but are back on track.

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Few property developers would have been as pleased to see the recent upturn in the housing market as Infinity Group's Bob Robertson.

Robertson is overseeing the development of Pegasus, a new town slowly taking shape on the shores of Pegasus Bay, just north of Christchurch.

The project is being jointly developed by Robertson's Wanaka-based Infinity Group and Australian property developer Brookfield Multiplex, with funds provided by beleaguered financier Bank of Scotland International.

If all goes to plan, Pegasus will comprise 1950 new homes and a bustling town centre. The golf course, beach-fringed lake and most major earthworks are near completion and houses are popping up around newly formed streets.

But the recession has taken its toll on the project. For six months from late last year, sales of sections virtually ground to a halt, Robertson said. And, to make matters worse, some people who had already bought sections started trying to resell them rather than build.

Inevitably, those sections coming up for resale were offered at lower prices – most at a 15% discount but some at up to 20% – than those still being marketed by the development company. And that caused some who had signed conditional contracts for sections to try to wriggle out of them.

In May Robertson told The Press that 451 section sales had settled and titles had been issued to new owners. By last week that number had climbed to just 489, so it has been a slow, hard slog.

Perhaps remarkably through that period, Bank of Scotland kept the money supply flowing, allowing development work to continue.

However there were some budget cuts. The biggest was the decision to delay development of the town's commercial centre for two years.

As an interim measure, Robertson put Infinity's money into building and operating a large general store which opened last week. At 500m2 he described it as being bigger than a Four Square and smaller than a supermarket. A cafe and bar will also open shortly.

Until the planned town centre gets under way, those facilities would provide basic services to new residents.

However Robertson is confident that the development has now turned the corner as the resurgent housing market revitalises buyer interest.

The decision to keep developing through the recession was the right one, Robertson said, because it's given potential buyers confidence that the project will be finished.

The discounting of resale properties had stopped and those that had already bought sections were proceeding with plans to build, he said. "We aren't getting many defaults either, it's probably only about 4% [of sales]," he said.

Encouraged by rising house prices, potential buyers who might have been delaying a decision are now starting to sign contracts. "From late last year until last April we had a lot of people walking in and kicking tyres but not buying. Over the past few months we've seen a lot of the same faces coming back and they are choosing their section and signing contracts. We are starting to make reasonably good sales every week, whereas we did virtually nothing for six months."

Even so, the company settled about $100m of sales over the last 18 months. The fact that was achieved during the depths of recession gives Robertson confidence that Pegasus is now on track to achieve $160m of settled sales by the end of March. That will coincide with a sharp decline in costs as most of the major development work is finished, which should keep the Bank of Scotland happy.

"We survived the downturn pretty well. I've got say I think Pegasus may be the best loan they have on their books and, if it's not, it would be one of the best. So we have a very good relationship."

- © Fairfax NZ News