Developer secrets: Why your home could be worth more than you thought

By NZ Herald

Article By: Ben Leahy
Ben Leahy is a reporter for the New Zealand Herald.
Ben.Leahy@nzherald.co.nz

A Kiwi developer says it has doubled its monthly sales of townhouses and apartments since the Covid-19 pandemic hit even though the cost of buying land has sky-rocketed.

The Herald yesterday reported developers were increasingly “scared” of buying at auctions due to competition for homes “blowing up” prices.

And Blair Chappell, managing director at Williams Corporation, confirmed land-buying costs had leapt about 60-80 per cent higher for developers in the past nine months.

Yet – despite that – business was still booming, with Williams Corporation selling $124 million worth of property in the past three months alone, he said.

That equated to handing over keys to 226 “affordable”, new-built townhouses and apartments at an average 75 per month.

One recent Lower Hutt development composed of one- and two-bedroom properties priced from $510,000 sold out within a day.

Prior to Covid-19 hitting, the company averaged about 35 sales per month.

“We’ve seen a big upwards surge in the market for our kind or product, and it’s been a really good mix of owner-occupier and investor buyers,” Chappell said.

The sales surge matched a push by city planners and developers to build more high-density housing in New Zealand’s cities.

Building plans for a record 10,000 new apartments and townhouses were approved across the country in the 12 months to August, Stats NZ earlier reported.

That was almost 10 times as many as the same period eight years ago.

Chappell said his company specialised in so-called “infill” housing.

That meant hunting out inner Auckland, Christchurch and Lower Hutt homes on large blocks of land that could be demolished to make way for affordably-priced apartments or townhouses.

And while the Government’s KiwiBuild scheme had delivered about 600 homes, Williams Corporation was set to complete 365 houses this financial year with 400 more in its pipeline for next year, Chappell said.

Yet with Auckland’s biggest real estate agency, Barfoot & Thompson, saying its average sales price last month climbed higher than $1m for the first time, land costs for developers had also soared.

Chappell said it was “horrible” having to pay up to 80 per cent more for Auckland land compared to one year ago.

However – because the company built an average of about 10 houses per development – the increased costs could be dispersed across each new property.

That meant the end sale price of the company’s apartments and townhouses might have only gone up about 8-12 per cent in response, he said.

Williams Corporation further kept costs down by pre-building frames, floors and trusses in a factory and transporting them to site – thus shortening construction time.

The company never bought properties at auction either.

Blair Chappell

We find it a lot easier to sit down face-to-face with the owners on a site as opposed to ending up in a Dutch auction by real estate agents,” he said.

When making offers, the company presented comparable recent sales to home owners to justify its prices.

But one of its main advantages was flexibility to work with home owners, Chappell said.

“We do our best to suit their needs, so do you need us to pay you in one month or do you want to get paid in six months so you can find somewhere else to live,” he said.

“We’ve got no intention of ripping people off.”

To find willing sellers and meet its build schedule of acquiring an average one new property every week, the company employed 35 sales people.

All could be mobilised to door knock, call real estate agents or prowl property listing websites like NZME-owned OneRoof.

“You focus 35 people on one specific area, it generally shakes a tree and a few things drop,” Chappell said.

“If anything, the biggest objection we are having in the current market is people telling us, ‘I would love to sell my house, I’m happy with the price you will pay me, but there is just not enough other homes for sale on the market to buy afterwards’.”

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