New Zealand hit hard by credit crunch

The global property slowdown is biting hard in New Zealand where developers are putting projects on hold, spending cash reserves and even going into receivership.

One of the latest projects to be affected is an upmarket apartment block in Christchurch designed by Sir Miles Warren. The developer behind the 19 luxury Parkbridge apartments priced between $1 million and $3m, Park Terrace Apartments, was put into liquidation at the request of Inland Revenue Department, which is owed $242,152.

Finance company PMIT Nominees is owed $2m under a mortgage over just one of the apartments while Mascot Finance has a second mortgage.

It is the latest in a series of financial problems for developers and investors in New Zealand. Earlier this year failed property development company Blue Chip Investments left a significant number of smaller New Zealand investors financially desolate when the company collapsed.

Now, legal action has been taken against solicitors concerning the advice they gave to these investors. Auckland firm Ellis Law is acting for well in excess of 100 victim investors, and proceedings are underway for negligence. Several valuers are also facing legal action.

Experienced property developers are drawing on nest eggs to get them through as the cooling property market. Developers said those who owned land and had good relationships with their banks were better placed to survive the slump, but property speculators and those who had borrowed from finance companies to develop subdivisions would find the going tough.

Christchurch property investor and developer Gordon Chamberlain said confidence in the property market had evaporated and admitted he has put projects on hold while he gauged the market.

'I have been in business a long time and this is about the third downturn I have been through. There is always a reason, particularly in New Zealand, but for some reason this one's a bit different having been triggered by internal and external factors including the dire property markets in England, Australia and America,' he said.

Hamish Wheelans, of Gillman and Wheelans, said the length of the downturn could only be guessed but there is long term optimism. 'What we do know is the residential market doesn't die, it just stops for a while and then starts again. People don't sit on their hands for too long,' he said.

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