A young couple who lost out on buying their first home after the developer increased the price by $150,000 says they are heartbroken.
Some first-home buyers are finding out that even with a signed contract in hand, sellers can demand thousands more or they kill the deal.
The Rosier Park housing development by F&P Dream Homes in the Auckland suburb of Glen Eden turned into a nightmare due to covid, says the developer Josh Fan.
He says Auckland suddenly went into alert level 4 and they had to rebook inspections with the council and subcontractor.
"The delays caused much more construction cost and financial cost," he told The Project.
Fan says all those extra costs forced him to raise the price of several homes after the deposit was already paid.
Price tags jumped anywhere from tens of thousands of dollars to $150,000 - which is what happened to Fraser Galbraith and Marina Person.
"They gave us 10 days, and then five more days to haggle," Galbraith says.
"We offered them $700,000, which was $75,000 more than the original deal, at which case they kicked us out of the deal."
He adds that they only realised what was happening to them once they "got that ruthless email asking for the big bucks".
"We're really heartbroken, disappointed," Person says.
Galbraith says there was "absolutely nothing" they could do about it.
What the couple experienced is perfectly legal under what's called a sunset clause. It's intended to give both buyers and sellers the right to change an agreement when the unforeseen happens. But some critics suggest the clause could be used to end contracts so homes can be relisted at a higher price.
"If there are enormous delays, it gives the developer a timeline to work to otherwise the purchaser can walk away," says Opes Partners economist Ed McKnight.
"We deal with about 58 developers across the country and we've never seen anything to this magnitude," adds Opes Partners managing director Andrew Nicol.
Fan is not new to developing. He helped create residential and mixed-use developments worth over $600 million in China. Despite all that experience, the F&P Dream Homes founder says he couldn't foresee the problems that arose.
Construction, consultants, and finance costs unexpectedly increased - Fan says it's not about making more profit.
He says subdivision works got stuck around July 2021, there was a high voltage cable laying delay for a couple of months, and the original construction costs "just doesn't stack up anymore".
"All the consultants, the extra cost per unit is around $50,000 … The finance cost increased $357K," he says.
"I charge for more money not to make more profit."
While developers can try to recoup costs by selling higher, Galbraith and Person, who put everything into securing the deal, have watched house prices rise out of their reach.
"We used our money to start all of this, and then treating us as he did, I think, you know, I don't have words for it," Galbraith says.
While there's been building supply shortages, according to the Ministry of Business, Innovation and Employment, the entire industry is feeling the pressure.
"There is no doubt that COVID-19 and now increased global demand have affected international supply chains, driving up costs," they say.
Even still, there's serious concern from those in the industry about incidents where prices are increased.
"It makes people nervous about buying off plans, which is a completely safe thing to do if you're buying with the right developer," Nicol says.
McKnight has some advice for future home buyers.
"Get it out of the contract. One other alternative we've seen is having it so that the developer can't use this clause in order to sell the property at a higher price. Biggest thing to do, work with your solicitor, negotiate this clause," he says.
But all that is little comfort for Galbraith and Person who thought they finally had a place to call home.
"We're really disappointed, heartbroken, because we saved up so much, thought we could move in, start a family," Person says.
