Plans for the new Chelsea Rise apartments (far left) in Birkenhead. Kalmar Construction started on the site around March. Photo / Chelsea Rise website
Plans for the new Chelsea Rise apartments (far left) in Birkenhead. Kalmar Construction started on the site around March. Photo / Chelsea Rise website
Two under-construction Auckland apartment projects and one in Wellington are the first to get the Government’s backing via the new Crown underwrite introduced seven months ago.
Housing Minister Chris Bishop and Building and Construction Minister Chris Penk announced the new scheme on October 4 to boost housing supply.
The underwriteis aimed at helping construction recover from the downturn and helping developers get bank finance for consented, ready-to-start projects.
A minimum of 30 homes must be built to qualify, so the multi-unit schemes both won inclusion.
A Ministry of Housing and Urban Development spokesman confirmed the Auckland schemes winning the underwrites.
Plans for Chelsea Rise, a new apartment building at 76 and 82 Mokoia Rd, Birkenhead. Image / Darren Brown
They are:
Two buildings by Ockham Residential and the Marutūāhu iwi collective, off Carrington Rd on ex-Unitec land. Toi is the first 65-unit block at the new Maungāronga village, Ōwairaka Mt Albert and is nearing completion.
Chelsea Rise, a 77-unit scheme at 76a and 82 Mokoia Rd, Birkenhead, in the shops opposite the mall.
Toi, new apartments in Owairaka Mt Albert by Marutūāhu-Ockham, pictured in February. Photo / Ockham Residential
A third project in Wellington’s Whitby also has the Crown backing.
William Deihl of Ockham said the guarantee was crucial.
“It was huge for us. If we had not got the backing, we literally would not have been able to build the building.”
The underwrite was for building four, up to its 10th level and interconnected to Toi, which Deihl said Ockham refers to as building three.
Auckland Mayor Wayne Brown with Ockham's William Deihl (centre) and Mark Todd. Photo / Michael Craig
Toi has 65 units. Deposits were taken on 23 units, he said.
“It’s an extremely tough market, but it will recover and we’ll be here when it does.”
Darren Brown is heading the Chelsea Rise scheme in Birkenhead, where Kalmar Construction won the contract, started two months ago and is drilling 76 piles up to 35m deep.
The Crown underwrite was a smart and timely initiative, he said.
Darren Brown, formerly of financier Marac and Sugartree apartments, is now developing at Birkenhead. Photo / Michael Craig
He needed presales to get bank funding and start construction. But over the past three years, off-plan apartment sales had been slow.
“That’s where the underwrite policy has played a valuable role. It was designed to support well-considered, quality developments like ours – led by experienced teams with a strong track record – to proceed despite broader market hesitation. Because of this, we were able to begin construction in March, rather than delaying for another 12 to 18 months," Brown said.
Plans for the new Chelsea Rise apartments (far left) in Birkenhead. Kalmar Construction started on the site around March. Photo / Chelsea Rise website
The developer could ask the Crown to buy about 30 of the 77 units if they didn’t sell by the completion of the project, Brown said. That is worth around $22m.
But he thinks it’s highly unlikely those last 30 won’t sell and is predicting a dire apartment shortage and price rises because so few projects are rising now.
The ministry spokesman said three apartment developments were underwritten for a maximum exposure of $75.5 million.
Costs only materialise if underwrites are triggered. Not all will be called on, he said.
“The three projects contracted to date met the eligibility criteria and best aligned with the residential development underwrite objectives and assessment framework. We expect further underwrites to be made as eligible applications are received and approved,” he said.
Toi, the new apartment building in Owairaka Mt Albert by Marutūāhu-Ockham, this year. Photo / Ockham Residential
All up, 43 applications have been received, but 21 of those are not progressing.
Those applications were not progressed as they did not meet the eligibility criteria or review assessment, the spokesman said.
“The Marutūāhu-Ockham application covered a project of two buildings. The underwrite covered units across two buildings in order to spread the Crown’s risk and ensure a better mix of typologies. This approach is consistent with the aims and objectives of the RDU programme," he said.
On October 4, the two ministers said interest rates were still high and building consent rates remained low.
Developers often needed to secure presales on a proportion of houses in a development before they could access bank finance.
This was particularly true for larger, medium to high-density developments such as apartments, the joint statement said.
Due to the housing market downturn and high interest rates, some developers were unable to achieve these presales from the market.
An underwrite provides this presales assurance to banks and funders, which allows them to lend finance to the developer for construction, the statement from Bishop and Penk said.
Anne Gibson has been the Herald‘s property editor for 25 years, written books and covered property extensively here and overseas.
