20 May 2019

Lack of sales in Christchurch adds to KiwiBuild pressure

7:17 am on 20 May 2019

Another KiwiBuild development backed by taxpayer money is failing to generate buyer demand - prompting more calls for Labour's flagship programme to be dumped.

Artist's impression of KiwiBuild home to be built in Spreydon. KiwiBuild is teaming up with developer Mike Greer Homes to construct more than 110 homes in West Auckland and Christchurch.

An artist's impression of a KiwiBuild home to be built in Spreydon, Christchurch. Photo: Supplied / Mike Greer Homes

The Wanaka development has already come under scrutiny after slow sales - now KiwiBuild houses are sitting unsold in Canterbury.

Under the contracts, the developer can now either sell them on the open market at a cheaper price, with the government topping up any shortfall, or require the government to buy the properties back.

That happens under the underwrite agreed to for several developments - hundreds of millions of taxpayer dollars committed to shift the risk from property developers to the Crown by promising a guaranteed price.

Back in February the government announced it would partner with Mike Greer Homes to build 104 houses in Auckland and Christchurch and the outer suburbs - 65 in Canterbury.

Last November, ministers were told there were 4083 people on Kiwibuild's Register of Interest in Christchurch, with an estimated shortfall of 1000 houses.

Housing Minister Phil Twyford said in parliamentary responses to National's Judith Collins none of the houses in the Canterbury developments had been sold; all had gone on offer on 20 February.

Mike Greer is currently marketing seven KiwiBuild homes, with prices ranging from $459,000 to $480,000.

Helen O'Sullivan took over as head of the KiwiBuild unit in February. It was surprising, but she was not "overly concerned" the houses had not sold, she said.

"They're good quality homes, they're warm, dry, modern and by a recognised builder."

The focus had been on first home buyers who "take a very long time to make up their minds to purchase and it is a complicated buying process".

Work was underway to see how to better market KiwiBuild homes, said Ms O'Sullivan, and how demand in certain areas was assessed.

The point of the underwrite was to provide some certainty to developers to get supply moving, she said, with one of the problems in the construction industry being its "stop, start nature".

But Ms O'Sullivan admitted the prospect of an underwrite being triggered so early in a development was disappointing. "But I guess this is a new programme, we are taking the learnings from this to change the way we sell things."

There has been political debate about how tough the assessment is for developers to secure a Crown underwrite, but Ms O'Sullivan said it was very robust.

"We get grumped at because it takes too long as opposed to it being too quick. Each proposal is assessed for the capability, the credibility and track record of the developer.

"It's assessed for the nature of the development, whether it meets appropriate urban design standards, for value for money, against market... but ultimately it is a professional judgement."

Problems selling homes in Canterbury and Wanaka would inform future underwrite assessments, she said.

Judith Collins

Judith Collins Photo: RNZ / Rebekah Parsons-King

However, Ms Collins said KiwiBuild should be dumped. "It was not well thought out in opposition and has been a dire failure in government.

"So early in the piece to have a major platform like this fail means the only way forward is a retreat from it and to get into community housing... not trying to compete in the market with and against other property developers."

Now it was at the point, she said, where the developer could just recoup his losses courtesy of the taxpayer, with many more houses covered by the underwrite.

"Well, we've got these contracts in place and the government really can't walk back from them unless they want to pay out the developers.

"But we've also got situations such as Wanaka where's there's almost 200 more homes that the government has signed up for - they can't sell the ones they've got now."

The government may have to start negotiating with the developer to try to get out of what is a "difficult situation", she said.

Both Mr Greer and Mr Twyford refused to be interviewed.

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