Up to 35 Projects Canned
Thirty-five Auckland multi-unit residential developments have been cancelled in the last year, according to the executive who has told Flo apartments buyers that the project has been axed.
Pete Evans, Colliers International's residential project marketing national director in Auckland, said cancellation of the west Auckland project came after many other developments had been canned.
People who paid 10 per cent deposits for the 91-unit Flo project in Avondale are being refunded.
"There's been 35 [developments] that haven't gone ahead in the last 12 months," Evans said of apartments, terraced housing, townhouses and residential projects.
"Our research tracks that. Funding is often a risk and building costs going up is another reason."
Colliers marketed the now-cancelled Flo, the troubled Spring Park in Mt Wellington and Hemisphere apartments in Albany, Evans said.
Avondale's Flo Apartment project cancelled, buyer 'devastated'
Flo buyers paid deposits on 81 of the 91 units, he said, committing about $47 million to that project. However, it was not enough to make the development work.
Rising construction costs and problems getting funding resulted in cancellation of the multimillion dollar project. The apartment block was designed by Young & Richards.
"You will have received advice from ... the vendor of Flo Apartments, Rosebank Road, Avondale, advising that, due to unforeseen problems in securing development funding and rising construction costs, the vendor is unable to confirm satisfaction of Clause 20.1 of the sale and purchase agreement," said a letter from Evans.
Evans' letter told more about the cancellation.
"Replacing your Flo opportunity is possible. Colliers is working with proven developers on a number of projects which we believe offer the best opportunities, for your budget, in the market today. Due to your circumstances we are offering you the first opportunity to consider these projects before the general public."
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Flo Apartments developer Jon Sandler had said that places would be affordable, starting from $375,000 and ranging up to more than $700,000 on land declared a Special Housing Area (SHA).
Ten per cent of the units must be considered affordable to meet the SHA requirements.
In June, CBRE research head and senior director Zoltan Moricz said plans for 28 Auckland apartment blocks containing 1900 units had been deemed "abandoned" and not gone ahead as originally planned. Abandonment was classified as a project where marketing commenced but no work started within the original timeframe.
Some of the new apartments might never be built, but plans could also be on-sold to other developers or perhaps the projects would be down-scaled, Moricz said at that time.
This year's Mood of the Boardroom survey showed that 84 per cent of CEOs' agree that Prime Minister John Key's advice about starting on the property ladder by buying an apartment should be heeded by Aucklanders' looking for a first home.
First-home buyers devastated
Prospective first-home buyer Andrea Warmington said she was devastated by the cancellation of the Flo project.
"This weekend, I found out this development will no longer be proceeding 'due to unforeseen problems in securing development funding and rising construction costs'," Warmington said.
Andrea Warmington, First-home buyer
"I am devastated by this news and my confidence in buying an apartment off the plans has been badly shaken."
Fellow apartment buyer Antony Hopper described himself as "completely devastated" by the cancellation.
"We literally scraped together every dollar we had to make up bank deposits as well as completely changing our lifestyle to live in a tiny, damp and cold house so we could save on top of the deposit while the apartments were being built.
"Can you imagine how gutted we are? Our dreams of home ownership were destroyed overnight by a poor excuse of a letter which tried to sell us more property! All our sacrifices were for nothing.
"What saddens me the most is the complete lack of transparency regarding the whole project. Everyone was more than happy to sell us a story and take our money but after the contracts were signed we were virtually left in the dark.
"Other than the news over the weekend, the last notification I received from the developer was on July 28. I of course tried multiple times to get in touch with the developer and even his solicitor.
"I don't know if I can go through this process again, I think buyers take a huge risk and have very little protection. I believe the media has a responsibility to warn young first home buyers about the pitfalls when buying of the plans considering the coverage new apartment projects are receiving at the moment," a saddened Hopper told the Herald.
Jon Sandler defended the contracts he struck on Flo and responded directly to buyer Andrea Warmington who today appeared on the front of the Herald.
"It's standard that developers have six months after the sale and purchase agreement is signed and deposit only paid to let purchasers know if a development is going ahead.
"Andrea Warmington's solicitor would have told her that when she bought as it is in her contract. But yes, like Andrea, I am very disappointed. It was my vision to deliver aspirational entry level housing to Aucklanders like Andrea. This was a beautifully designed building, on a great site, at an affordable price with smaller profit margins. Plus it was a sales success - with apartments sold out," Sandler said.