KEY POINTS:
Beware two traps in property.
The dangers of buying apartments on leasehold land and units off the plan before a block is built were illustrated at an Auckland apartment auction last week.
City Sales sold all the apartments available, but vendors suffered enormous losses on the sale of their properties. Their places sold for a total of $1.1 million less than what they had paid for them.
However, the agency said this showed the dangers of buying two types of properties: units in blocks standing on leasehold properties and pre-purchase of apartments before the block had risen. These were the reasons for the big discounts, City Sales said.
The agency sold eight units for just over $1.9 million, and seven of the eight units sold at the auction. A unit in the Sentinel settled a day later.
Mike Richards, sales director at City Sales, said the sale of a unit at The Beach suffered the biggest loss: $325,000. However, the vendors had bought through failed apartment business Blue Chip, he said, and they had bought off the plans.
The unit in the Sentinel block, at Takapuna, was also bought off the plans and the elderly couple who sold it suffered a $275,000 loss.
Richards said other units bought off the plans and sold via the auction were at Unilodge and Volt on Queen. The Princes Wharf unit was on a leasehold title, he said.
Richards attributed losses to the units being on leasehold ground tenure, meaning buyers were not getting freehold properties; and being bought before blocks were finished.
"Once again, off-plan buying has proved a disaster, and leasehold continues to take a hit," Richards said.
Today, the real estate agency takes 10 units to auction.
Richards said the results would be interesting because six units were in the Railway Campus at Quay Park and are being sold with "zero" reserves, meaning that if the auctioneer is offered an extremely low amount, he might just take it.
"It is a complicated situation down there right now and this will be really interesting," Richards said.
Investors face two years' loss of rental income and a bill of $6.1 million in repairs, the Business Herald reported last month.
The University of Auckland leases the building from investors, but students were forced out because of a leaky roof and other problems.
Richards said the other apartments going up for auction today were:
* A two-bedroom unit at The Docks with a tandem carpark. The block is on leasehold land.
* A two-bedroom unit at Aura in Cook St.
* A one-bedroom unit in the Empire on Whitaker Place.
* A studio unit (no bedroom) in Quadrant on Waterloo Quadrant.
