– A leasehold apartment in central Auckland sold for $34,700 due to impending ground rent increases.
– The Scene One complex is undergoing remediation for weathertightness issues.
– Thousands of apartments on Ngāti Whātua Ōrākei Whai Rawa land could be affected by the review.
A leasehold apartment in a leaky building in central Auckland has sold under the hammer for just $34,700, with the owners deciding to quit their property rather than risk being slapped with a hefty increase in their ground rent.
Ray White agent Steve Kirk said his vendors were among many in the Scene One complexes on Beach Road who have decided to sell before the next ground rent review, which is expected this month.
His clients purchased the one-bedroom apartment off the plan 21 years ago when there was a 15-year “holiday” on ground rent payments, but ever since the “holiday” period came to an end, they have struggled with the ever-increasing fees.
Apartments in Scene One, near Auckland’s waterfront, are attracting older cashed-up buyers. Photo / Supplied
“They were liquidating what they could out of it so they could move on,” he said, noting that they had taken a $200,000 hit on the property.
Kirk told OneRoof that the sale price of $34,700 was in line with what other apartments in the complex were selling for.
In addition to being leasehold, Scene One is currently being remediated for weather-tightness issues.
Kirk said the ground rent review occurs every seven years and increases are based on the value of the land. However, the last review, conducted in 2018, saw owners hit with a 133% increase.
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“Outgoings are currently around $20,000, which includes OPEX, ground rent and rates,” Kirk said.
He said there was still strong interest in the apartments. Many of his buyers were older people who could not get bank loans, but instead used their KiwiSaver to fund their purchases. They liked the security of owning rather than renting, he said.
The new owners of the Beach Road apartment he just sold were two retirees who owned an apartment nearby.
Apartment owners in Scene One on Beach Road saw the ground rent rise by 133% after the last review in 2018. Photo / Supplied
City Sales sales manager Scott Dunn said some of the apartment owners were anxious about the imminent ground rent review. Photo / Supplied
They were competing against three other registered bidders at the auction. All up, 51 bids were placed, with the price rising in increments of $200 at times. “Everyone wanted to get it for the same amount based on the variables of the property.”
There have been about 20 sales in Scene One in the last 12 months, with prices ranging from $7000 to $55,000.
City Sales sales manager Scott Dunn said sales in the complexes peaked about six to 12 months ago when people started to worry about the ground rent increase and decided to get ahead of it.
“The ground rent review is imminent. We would absolutely expect to see many owners anxious about this.”
Dunn said in the past, the landowner and apartment owners had disagreed over the value of the land, which is used to determine the rent increase. They then entered arbitration, which could potentially take years to resolve.
“Nobody knows what it is going to be this year. A lot of people would argue that the land hasn’t increased in value so much, but it’s really down to the landowners.”
Dunn said the sale prices of the apartments varied greatly depending on what complex they were in because Scene One was being remediated, while Scene Three had much higher outgoings. Scene Two was seen as the most attractive of the three and tended to fetch higher prices.
The impending ground rent review affects all the apartments built on Ngāti Whātua Ōrākei Whai Rawa land, including the Scene complexes, The Docks, Hudson Brown, The Landings, Parnell Terraces, The Mirage, Railway Campus, and buildings on Cotesmore Way, Sudbury Terrace, and Dove Dale Place.
“There would be thousands of apartment owners that could be impacted by this.”
Ngāti Whātua Ōrākei Whai Rawa negotiates with the lessee, who decides the payment terms and final rental amount to be paid by the apartment owners.
– Click here to find more apartments for sale in Auckland Central