Auckland's housing market is so hot developers are increasingly looking to approach home owners privately in a bit to cut out the competition. Photo / 123rf
Auckland's housing market is so hot developers are increasingly looking to approach home owners privately in a bit to cut out the competition. Photo / 123rf
Developers are increasingly going door to door to make private offers on Auckland homes as they seek to avoid buying at auctions where sale prices are "blowing up", property pundits say.
Just this week, one developer paid $8.9 million in an off-market deal for a grand Remuera mansionnow destined for demolition, while Te Atatu residents also reported developers had been door-knocking local homes.
Ray White Manukau agent Tom Rawson said it was no wonder some developers were running "scared" from auctions.
They not only faced fierce competition from other developers keen on land to turn into apartments and townhouses, but were increasingly being outbid by families chasing dream homes, he said.
Prices were also rising so fast that agents had trouble valuing homes because a price quoted in the morning could be out of date by the afternoon, Rawson said.
"It is impossible for agents to give a really accurate price because you go along to auction and you get two or three people - and the developer up against the home-buyer - and the thing gets blown out of proportion," he said.
The sizzling auctions were part of a hot market many real estate agents were calling "crazier" than the 2016 boom.
Auckland's median sales price had now leapt to a record $955,000, the Real Estate Institute's September data showed.
If you live in the right areas, you might soon receive a visit from your local developer keen to bulldoze your home and build new apartments. Photo / 123rf
Developers earlier this year helped light the match that ignited the hot market by regularly paying high prices at auctions.
Often more flush with cash than other buyers, they typically had access to low interest rates in New Zealand and overseas, Harcourts real estate agent Aman Gulia said.
They were also motivated by greater opportunities created by the 2016 changes to Auckland's major planning document, the Unitary Plan.
These changes allowed more multi-storey apartments and townhouses to be built near public transport networks and shops in the hope Auckland would build up rather than out into its suburbs.
And while it took a few years, developers had now grasped what was possible under the Unitary Plan and which types of city properties they should buy, Gulia said.
That led one developer to arrive unannounced at the home of Te Atatu resident Rangi - who didn't want his surname published - with its 804sq m section.
Rangi's wife later told neighbours developers were visiting homes on Smith St and Montmere Ave "offering good prices" to buy and the chance to avoid paying real estate agent fees.
"Today is your day, if you are keen," she told them.
"It is family land. It will go to the next generation," he told the Herald.
One property investor - who didn't wish to be named - told the Herald he had spent his life snapping up homes and land with development potential and was now taking advantage of the sky-high prices to cash in.
He sold a Glen Eden investment property two weeks ago, after developers cold-called his agent and offered $500,000 above the home's council valuation.
He also sold another Avondale home on Roberton Rd at auction last week for just over $2m.
It was bought by a builder keen to construct eight units on the 1226sq m site.
However, it had earlier been on the radar of larger developers, who unsuccessfully sought to convince the elderly residents next door to sell up as well so 16 units could be built instead of eight.
Auckland's housing market is so hot developers are increasingly looking to approach home owners privately in a bit to cut out the competition. Photo / 123rf
Ray White's Rawson said another tactic developers used to try and beat the market was making high-priced purchase offers on homes immediately after they came up for sale.
These offers typically included a condition requiring the owner bring their auction date forward by weeks as the developer hoped the shortened marketing campaign would cause other buyers to miss out.
However, Harcourts agent Gulia said developers actually preferred to take their time when buying because it allowed them to compile the building reports needed to ensure their project numbers stacked up.
That's why they liked to buy privately, because it let them include a condition stating their offer was subject to completion of due diligence, he said.
To compensate for this added delay, however, developers typically paid 10 per cent more than families or buyers on the open market, Gulia said.
He said this made selling to developers perfect for buyers with more time on their hands.
Gulia said he and his Harcourts team had a database of more than 300 developers. He said he usually approached developers one at a time on behalf of home sellers.
Giving the first developer 24 to 48 hours to make their offer to buy, he then moved onto the next if the first wasn't interested in a bid to play them off against each other.
Other agents cautioned home sellers to seek advice if approached privately by developers.
Derek von Sturmer, from Professionals Real Estate, said the intention of those going door to door was often to "cut out competition in a very hot market".
Ray White's Rawson also noted that for every developer knocking on a home owners' door, there were likely 10 more who would be interested once they saw the house advertised for sale.
He said the market was the "craziest" he had ever seen it.
Looking through results from the past week, he saw properties that everyone expected to sell for less than $1.5m, selling close to $2m, and homes in areas typically worth $600,000-$700,000 going for just over $1m.
"That is ridiculous," Rawson said.
"Anyone who sold a property at the moment without going to auction would almost be doing themselves a disservice."
