Weak sales signal hard year

Awana Bay, Great Barrier Island. Photo / Supplied

Two sections of prime beachfront land failed to sell at mortgagee auction this week - a sign of what one agent warned will not be an easy year.

Another property expert said the effects of the recession have led to a backlog of coastal development property that could take 20 years to sell.

The two properties went to auction at Bayleys Auckland offices, but despite $1 million-plus bids, both were passed in.

One, a beachfront property at Mangawhai Heads, passed in when bids reached $1.9 million.

The land is part of the Bream Tail development, a 40-section development across 405ha that includes shared use of tennis courts, a pool and riding facilities.

The other was of a house and section in Awana Bay on Great Barrier Island, with an official valuation of $2.1m. Bidding stopped at $1.5m.

Next month, three sections of land in Mataka Station in the Bay of Islands are going to a mortgagee tender.

But Tony Bayley of Bayleys Realty said the market for beachfront property was not going to be "boisterous".

"It's still quite hard to sell. I don't think it's going to be an easy year."

Rodney Dickens, managing director of Strategic Risk Analysis Limited, said the boom in large coastal developments was caused by speculators taking advantage of economic growth and low interest rates.

Other problems include the majority of coastal developments being exclusive, "top-end" sections out of reach for many potential buyers.

"For those sort of prices you're only able to sell a trickle of sections each year. There are only so many wealthy people," Dickens says.

Dickens, who has travelled to several coastal developments around the country, said several sites look like wastelands.

"There's going to be a lot of the coast where the only people who make any money are the councils getting rates and the lawnmowing contractors."

Dickens compared the coastal property boom to the Auckland apartment market, where oversupply has seen prices fall.

He estimated it could take 20 years or more to clear the number of sections left to sell.

The coastal glut matches a drop in house sales.