The rate of section sales at The Lakes is surprising the development’s new owners Carrus Corporation which took over Tauranga largest real estate development from the receivers in April.
In two months they have sold 60 sections, says general manager of The Lakes development, Scott Adams.
Carrus Corporation general manager Paul Adams.
“Whether it is a spike induced by build-up or a solid trend it’s too soon to say," says Scott.
“We were prepared to hold the land for better or for worse. We knew that buying the land at the price we got it for, it was debt free from our point of view. That was the risk we were prepared to take.
Scott says they are pretty happy with the result out there so far.
He doesn’t think the council’s discounted development contributions are behind it, and thinks it’s more to do with a change in financing. Under the receivers builders had to pay cash.
“It’s going to be interesting to see if the spike is caused by builders not able to buy lots.
“Well they could buy - but only on cash, and builders like to be able to buy on deferred terms so they only have to put deposit down, build the house, sell it, pay off the section in the 15 month period and haven’t incurred any interest on the land.”
Carrus Corp has sold 10 sections for cash and the rest on 15 month terms.
The city council’s decision to reduce development contributions came out last month.
The majority of the sections sold in the first month Carrus took over in May, so Scott doesn’t think it is a factor.
“I guess it’s a bonus but no one has flagged it as being a factor, but it’s potentially another benefit for us going forward.”
Another change in the Ten Year Plan for developers is dropping the council requirement for 15 lots per hectare, but The Lakes sections sold by Carrus have all been sized on the 15 lot rule.
Sections in the stage to be released next year will be sized at 12.5 lots per hectare.
“It is a return to the 600m2 section which is what the market has wanted,” says Scott.
Carrus is fighting a council requirement to control the built size ratio on sections to 45 per cent.
It means section owners have to build a big enough house to prevent the section later being sub divided.
It’s better controlled through the covenants registered to titles that buyers sign, says Scott.
“That’s to protect the purchasers’ investment as much as anything.”
Carrus also has issues over the council requirement to have a set-back for garages, which puts limits on the house design.
Meanwhile the demand means Carrus is bringing forward the release of 54 sections which prior to settling they didn’t expect to bring on until next year.
“We were thinking it would be good if we could sell 50 in a year, and we have done it in two months, sold 60 lots in two months.
“We’ve had 12 sections in Bethlehem sitting here three years, we can’t sell them. Similarly in Papamoa, we’ve had seven to eight sections sitting there for three years.
“Is this a spike or will it be substantial, it’s hard to know. We are coming into winter when traditionally section sales have been slow, spring is going to be the acid test.”
Meanwhile there are about six building companies, associated sub-contractors and individual builders all working at The Lakes.
“It’s good for the local economy good for the whole industry.”
The original lakes developer Grasshopper Farms went into receivership in February 2011, owing $95 million to its Scottish bankers. CArrus bought it for about $30 million, officially reopening the development for business in May.
The 250Ha development is about 25 per cent complete