A harbour side apartment in downtown Auckland sold at auction this week for $5000.
No, we haven't left a few zeroes off the price, it sold for five thousand dollars.
The apartment had two bedrooms, two bathrooms, two car parks, a reasonably sized balcony and offered expansive views across Auckland's harbour.
When it was offered for sale at this week's regular Ray White City Apartments' auction the opening bid was just five hundred dollars. There were a handful of hopeful buyers who bid the price up in $250 increments until all but one had dropped out and it sold under the hammer for $5000.
So what's the catch?
The apartment is located on the harbour side of the Scene One building at 2 Beach Road, just up the road from Britomart station.
It's a leasehold property and the operating expenses for the unit were $9460 a year, plus ground rent of $22,004, with the next ground rent review due in 2025.
Rates are $1683 a year, taking the owner's total outgoings to $33,147 a year.
It was rented at $750 a week ($39,000 a year) so it could provide an investor with a modest rental income.
However, the Scene One building is also facing significant remediation issues and according to Ray White's Damian Piggin who handled the sale, that is tied up in litigation.
The uncertainty that creates about potential remediation costs and who will have to pay them, is likely to have weighed heavily on potential buyers' minds when deciding how much they would be prepared to pay.
(Note: This article has been corrected. A previous version excluded the ground rent payable from the owner's total outgoings).
Details of all of the properties offered at the auctions monitored by interest.co.nz are available on our Residential Auction Results page.
The comment stream on this story is now closed.
Above and below: the interior of the apartment that sold for $5000.
- You can have articles like this delivered directly to your inbox via our free Property Newsletter. We send it out 3-5 times a week with all of our property-related news, including auction results, interest rate movements and market commentary and analysis. To start receiving them, go to our email sign up page, scroll down to option 6 to select the Property Newsletter, enter your email address and hit the Sign Me Up button.
28 Comments
This sounds like a good deal. Buy it in a corporate envelope, lease the 2 carparks out to pay the ground rent and you have virtually free accommodation. Do not participate in any remediation and if you are sued, just collapse the company. You may be evicted but I would anticipate probably get 2 to 5 years of free accom, who cares if it's a leaker if you paid nothing.
Genius!
I was thinking along the same direction too, you beat me to it!
Not so sure collapsing a company would work - legally dubious. But a young person with no other assets could declare bankruptcy when/if it comes to that. In many of these cases of leaky apartment complexes - the body corp decides to sell the property lock, stock and barrel for demolition; and I imagine that could be the likely outcome for this building too.
The owner was lucky to get rid of their liabilities.
Certainly one to watch.
I don't think a young person declaring bankruptcy is worth a few years free rent. Perhaps a condition of sale was the obligation to contribute $xxx towards remediation, which the article omits. The ground rent is ridiculous, though I do recall some of my cuzzies may be the freeholders. If the place get's demolished the plan is viable however.
If you were a few years into a 6 figure medical student loan which would also be wiped on bankruptcy maybe it looks a little more tempting.
In my mind the vendor is the clear winner.
Who wants a pig of an apartment - with all the sleepless nights trying to sort it out?
TTP
Depending on when they bought it I feel sorry for them. Could have lost hundreds of thousands of dollars while everyone else has made a fortune.
A plan to deliberately evade your responsibilities which you entered into with open eyes.
Might or might not work, but scuzzy thinking for sure.
My friend (who is a property lawyer) told me that this may well be considered fraudulent behavior which may infringe on a few laws, including NZ corporate laws (setting up a company with the sole purpose of evading responsibility is actually, in some cases, a crime, regardless of how effectively this is or can be enforced) . In any case, highly unethical and extremely reprehensible behavior. Yuck.
Total outgoings are 33k. Each carspace you would get max $100/ week each. More likely between $60-$80 each. So max you would get 10.4k combined. While still cheap rent....its a diabolical sitch. These buildings are an eyesore. Pay the compensation, tear them down, return it to public green space.
For sale: one hand grenade, pin is missing but we've got the lever taped down....
I could be interested. Smoke or frag?
Can't the buyer can enjoy the rent for a few years and then walk away if remediation costs are too high ?
What if the buyer is overseas ? Or goes overseas after a few years ?
How do you walk away if you're name is on the title?
"expenses including ground for the unit are $9460 a year"
I think it should be "ground rent".
It was an entertaining auction.
Yes, thanks.
The appalling standard of building work in New Zealand is truly staggering, shameful and an absolute joke!
And a who-ole lot more to come to light in time
Will we see this same news on the frontage of the NZHerald?
Gotta love the Scene Apartments, nothing but constant drama. If memory serves me right these don't even have a proper body corp?
I remember commenting a couple of years ago that this was likely a leaky dog, and was shot down for it.
No matter how good a deal might look never buy Leasehold in NZ.
Only in NZ! A clear example of the complete mess that is the Kiwi Housing market. Leaky building/poor construction/lax oversight by Building Inspectors/Ground Rent-what?../Greedy Developers/Speculators/Banks/Non-bank lenders/Government Regulation or lack thereof. Whoever bought this has brass one's. Fortune favours the brave they say.
Leaks, high remediation costs, high leasehold, high management costs,... free is paying too much considering it is a money sink. Better to buy tradable art then get caught in remediation and rising leasehold rates. But sure unethical people will try to avoid remediation and find a bigger sucker to sell to before then. Unfortunately there will always be someone left holding the time bomb at the end who was assured they could just take rental income then sell it to someone else right up until the debt is due. Sad for those who actually wanted to live there long term and who paid the original price, they have lost the most. I remember the construction and apartment sales boom. Lesson don't buy leasehold in NZ and never trust NZ construction. Decades on from original crisis and architects and the NZ engineering industry have only gotten worse.
I agree with all that, this debacle would have caused tremendous emotional and financial distress to buyers. It is a microcosm of the dysfunctional NZ housing market and contributes to high NZ house prices because Kiwi's (rightly) have no faith in apartments.
When we briefly visited Auckland in 2005 I’m sure we parked our car in the carpark that was on that land. Just a bare piece of land with a pay and display ticket machine. Should have left it like that!
I think you're thinking of the open-air carparks that used to be on the CBD-side of the Foodtown (where all the kids used to park their cars overnight to get loaded down at the Viaduct) or the ones across the road on the area now occupied by the arena carpark and some executive apartments.
It's a fantastic part of the city but the leasehold land element of it is a massive caveat that probably results in a fair chunk of underdevelopment.
Yes. I wouldn't go near that kind of real estate set up. Those people are suckers that buy into that crap. If they can pass it on to some other sucker then well done. If they lose their arse..serves them right for being gullible for entering into a ridiculous and high priced lease set up. Leasing anything is for suckers.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.