Chinese property investors pulling out of Sydney off-the-plan apartment purchases spooked the Australian banks, and that fallout is now being felt here in Auckland.
Jon Sandler, the Kiwi developing Avondale's now-axed 91-unit Flo, blamed tighter bank lending practices, which partly caused his project to be cancelled.
Colliers International's residential project marketing national director Pete Evans said 35 Auckland multi-unit residential developments have been cancelled in the past year.
Sandler referred to a Herald article from September that reported Property Council chief executive Connal Townsend announcing banks had tightened their lending on apartment projects.
"As per the article published in the Herald last month, there has been a significant shift away from funding projects of Flo's size since we launched the project," Sandler said.
• Projects canned: Home ownership dreams crushed
"Banks suddenly losing their appetite for this kind of development - a move driven by Australia - and construction costs going up, poses the important question of how we will solve Auckland's housing problem. This is one of several apartment developments in Auckland that have had to cancel recently. It's an issue for Auckland, especially with the Unitary Plan just signed off."
In the article, Townsend noted how the Unitary Plan was designed partly to allow an extra 400,000 new homes to be built here and the irony of tighter lending just as the city prepared to bring in that plan.
In August, the
reported how a mass of Chinese property buyers who had snapped up Sydney units off the plans had started to walk from their agreements because they could not get their money out of China.
The investors were even forgoing their 10 per cent deposits, the newspaper reported.
That spooked those Aussie banks so that by last month, Townsend and other New Zealanders were beginning to feel the fallout.
Worried developers with mass housing schemes began calling the Herald, describing how new lending was hard to secure, saying they were shocked at the sudden turnaround.
By September 27, Westpac NZ chief executive David McLean revealed how his bank - New Zealand's second-biggest residential lender after ANZ - had indeed loaned to the Auckland apartment sector last decade but was less involved this decade.
Yet Prime Minister John Key has said repeatedly that young first-home buyers in Auckland must consider apartments.
"I tell you where their first house is - it's an apartment. That is the reality of a first home for a young couple in Australia," Key said last month.
Flo 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. 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."
Sandler defended the contracts he struck on Flo.
"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.
"This was a beautifully designed building, on a great site, at an affordable price with smaller profit margins. Plus it was a sales success - apartments sold out," Sandler said.
Bruce Patten, a mortgage adviser of LoanMarket in Auckland, predicted more project collapses.
"The Reserve Bank is putting pressure on the banks to be careful in the funding of developments and also obviously there's pressure from across the Tasman from the mainstream banks," Patten said.
Nor could developers go elsewhere for money.
"The non-bank funders are running out of money because the property finance units have effectively pulled out of the market and now the developers are rushing to the non-bank funders for money, but they have limited supply. This is going to see more developments canned in my view," he said.