A developer expects Kāinga Ora will lose money selling the 95-hectare site in Tauranga it bought for $70.4 million in 2021.
Kāinga Ora is making arrangements to sell the former Ferncliffe Farm in Tauriko West after scrapping its plan to build 1000 homes on the land.
The state housing agency faced criticism for the price it paid to snap up the rural land, outbidding private developers.
An official briefing to ministers from Ministry of Housing and Urban Development officials described the original $71.4m offer - later revised down by $1m - as “over market value”, having not priced in significant development risks.
Classic Developments co-director Peter Cooney said the company was in the original bidding war with Kāinga Ora in 2021.
Cooney would not say if the Tauranga-headquartered company would try again when Kāinga Ora put the now residentially zoned site back on the market.
He did say, however, that he believed under the market conditions, “they [Kāinga Ora] will lose money”.
CBRE national director in rural valuation and advisory services Mark Passey said the value of development land generally had fallen.
“Since they [Kāinga Ora] purchased … all residential properties, development land has come back significantly.”
He said it was a factor of coming out of the Covid-19 pandemic.
“Everything went absolutely ballistic, and then we’ve, let’s call it, had a bit of a hangover since as interest rates went up and all the rest of it.”
He said unfortunately no one, including Kāinga Ora, was immune.
“There was quite a big downturn in property values in general.”
The chief executive of privately owned property developer Winton, Chris Meehan, told the NZ Herald in 2022 that Kāinga Ora had “significantly outbid 11 other experienced developers“, including Winton, for the land.
He said then taxpayers had paid “an absurd amount of money” and he would eat his hat if anyone moved into a house on the land within four years.
Meehan was approached to comment for this story.
Kāinga Ora’s acting general manager of urban development and delivery, Nick Howcroft, said the 2021 purchase of Ferncliffe Farm was based on two independent market valuations and aligned with expert advice at the time.
“On that basis, the price we paid reflected market value at that time.
“It is too early to speculate on what price the property might fetch in today’s market.”
The Ferncliffe purchase was the first made by Kāinga Ora under a then-new $2b land programme aiming to help deliver more affordable private housing at scale.
At the time, the agency stated that this project was a long-term investment in housing to accommodate the city’s growth, with construction to start in “three to four years”.
The agency announced last month it was preparing to sell the land after a decision to refocus on the cost-effective delivery of social housing.
In a statement, it said it had been talking to the NZ Transport Agency about using some of the land “to support important local transport improvements” and with the Ministry of Education about a potential school.
The remaining land would be sold on the open market.
A Kāinga Ora spokesperson told Local Democracy Reporting the agency expected to confirm the appointment of a real estate agent in the next couple of months, and the land would go on sale shortly after.
Howcroft said the organisation was taking a careful and considered approach to the sale.
“We want to make sure the sale of Ferncliffe Farm supports the wider development of Tauriko West and helps enable key local infrastructure and community facilities,” he said.
“The sale also provides an opportunity for another developer to deliver housing for the region, while we continue to focus on providing warm, dry social homes for those who need them.”
Tauranga City Council strategy, partnerships and growth general manager Christine Jones said Kāinga Ora advised the council it was reviewing its interest in Ferncliffe Farm in October 2024 and had put its development business case on hold.
Options were explored throughout 2025, with the intention to dispose of the land confirmed in November.
Ferncliffe Farm forms part of the Tauriko West urban growth area, which was zoned residential in 2025 to enable housing development.
Jones said most of the Tauriko West land was currently owned by Tauriko West Limited (Element IMF), the Tauriko Property Group with Classic Group, and Kāinga Ora, along with some smaller landowners.
Tauriko West was estimated to have capacity for at least 3000 homes plus schooling, local and neighbourhood commercial centres and community facilities.
Jones said this would be subject to future decision-making by the council.
Ferncliffe made up about 20-25% of the net developable area for housing.
“The land remains zoned for residential development, and it is expected that the residential outcomes will continue to be realised through a future landowner.”
Jones said Tauriko West and Ferncliffe Farm would play an important role in the delivery of housing in Tauranga, including providing a mix of densities and typologies to meet a variety of housing demands.
“Council will continue to work with Kāinga Ora and other community housing providers to help enable opportunities for affordable and social housing throughout the city to meet housing needs.”
The timing of development ultimately sat with Tauriko West landowners, she said, with the council helping to encourage and facilitate development through investing in community facilities and open space.
– LDR is local body journalism co-funded by RNZ and NZ On Air.
Ayla Yeoman is a Local Democracy Reporting journalist based in Tauranga. She holds a Bachelor of Arts majoring in communications, politics and international relations from the University of Auckland, and has been a journalist since 2022.