Kāinga Ora could be facing a hefty loss on an empty Wellington lot purchased during the capital’s recent property boom and now valued for millions less.
Kāinga Ora could be facing a hefty loss on an empty Wellington lot purchased during the capital’s recent property boom and now valued for millions less.
The state housing agency purchased the empty Adelaide Road site in October 2022 for $4.1m - more than double its 2021 rating valuation (RV)of $2m.
Wellington house prices peaked in 2021 with the average value up 60% on three years prior. By 2024 values had dropped on average by 24.4%.
The most recent RV assessment for the Mount Cook plot estimates it to be worth $1.38m.
When Kāinga Ora bought the land, Greater Wellington regional director Vicki McLaren said it planned to develop between 25 and 40 new homes on the site, describing the “pressing need for housing in the area”.
Plans for the housing never got off the ground and it’s now been confirmed as one of the sites Kāinga Ora plans to sell because the land is no longer deemed necessary for social housing.
Kāinga Ora is selling 132 Adelaide Rd after scrapping plans for up to 40 homes. Photo / Ethan Manera
The agency announced a major “reset” last week, axing hundreds of social housing projects across the country because they “no longer represent value for money”.
It concedes canning the projects means it will take a hit of up to $180 million that has already been spent on scoping and planning work.
Kāinga Ora has also decided to offload 20% of its vacant land following a review of its operations. The properties will hit the market over the next 12 to 18 months.
The sell off comes after concerns were raised that the agency had lost focus on its core role as a social housing landlord, veering too far into the role of property development.
Kāinga Ora’s deputy chief executive central Daniel Soughtton wouldn’t answer questions as to whether the agency expects to break even on the Adelaide Rd site, disputing the accuracy of the 2021 RV.
Plans to turn 132 Adelaide Rd into housing never came to fruition. Photo / Ethan Manera
“The market value for 132 Adelaide Road was independently assessed at the time of purchase as being $4,000,000 (excluding GST)”, Soughtton said in a statement.
“It’s important to note the rateable value is not an accurate reflection of market value. It is a measure used by local councils for rating purposes, calculated every three years using general sales data. It provides a snapshot from a point in time and does not take into account any subsequent market changes”, he said.
The agency said the price it expects to get for its land sales “will depend on market conditions and what buyers are willing to pay for it”.
Kāinga Ora central deputy chief executive Daniel Soughtton (left) and Bay of Plenty regional director Darren Toy. Photo / Laura Smith
Cotality NZ Head of Research Nick Goodall said it’s a disappointing move from the social housing agency, and believes given the market changes, it will likely make a loss upon sale.
“I think always disappointing to see a potential development not follow through [...] in some ways, not all that surprising given some of the conversations we’ve heard from the Government pulling back some of their support of some of the Kāinga Ora developments,” Goodall said.
He said he would expect the agency to “take a haircut” when it sells the land, given it purchased at the “peak of the market”.
“Anyone that bought near peak is certainly finding that they’re sitting on a property worth less than what it was when they purchased it.”
Cotality NZ Head of Research Nick Goodall. Photo / Supplied
Goodall said given its location, there will be strong demand for the site from a commercial or residential perspective.
“Wellington still needs more residential properties”, he said.
“If a developer saw the potential and could make the due diligence and the money work out, there’s some real potential for it,” Goodall said.
Ethan Manera is a New Zealand Herald journalist based in Wellington. He joined NZME in 2023 as a broadcast journalist with Newstalk ZB and is interested in local issues, politics, and property in the capital. Ethan can be emailed at ethan.manera@nzme.co.nz.
