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One of New Zealand's notorious former psychiatric hospitals will become the home of a horror show.

A haunted house is set to open next week in the old nurses' home at the former Kingseat Hospital at Karaka, south of Auckland.

And outside, a freaky forest attraction promises to make people "lost and scared in the dark ... your worst nightmare".

The shows are being set up by Spookers, which has mazes in corn crops where actors chase people with chainsaws. They frighten people in the Waikato and at three other North Island sites.

The company is aware of the potential for accusations of bad taste by choosing a former psychiatric hospital, where many experienced mental suffering and some patients say they were mistreated.

"That's why we've got it in the nurses' home and not the actual hospital itself," Spookers manager Julia Watson said yesterday. "We also will be doing absolutely nothing to do with a mental asylum."

The company chose the site, after a two-year hunt round Auckland, as it was ideal, she said. It had a huge building with plenty of land.

The building was "perfect - it looks like a haunted house. It had been derelict for 15 years, so it was very run-down".

Spookers would use 45 of the building's 200 rooms. Actors would "chase people around".

"We will have a lot of ghouls, absolutely scary people that you would expect to meet in your nightmares."

The attractions will generally only be open to adults, but a "lights-on, spook-free" tour will be available for children.