The money walked before the house existed
In West Auckland, buyers paid $2.03 million in deposits for planned homes on Babich Rd in Massey. The development company had promised up to 130 new homes on Red Hills Rd. It never even purchased the land. One buyer alone handed over $75,000. More than 60 creditors are listed as owed money. The director was described as uncooperative.
The critical detail: deposits were released from a solicitor’s trust account before any land settlement occurred. The most basic protection mechanism failed, not because it was unavailable but because it was not enforced.
A pattern, not an aberration
Babich Rd is not unique. A Tauranga family lost more than half of a $55,000 deposit when Compass Homes Western Bay of Plenty went into liquidation. They signed a contract, paid the deposit, and waited 18 months without receiving building plans. The company returned $10,000 of the $55,000. Unsecured creditors were owed more than $500,000.
In another case, six former clients of Enzed Construction reported the company took more than $60,000 before its director disappeared. One client paid a 60 percent deposit of $33,000 for repiling work that was never started.
These are not edge cases. They are the predictable outcome of a system where deposits can leave trust accounts, directors face limited personal liability, and insolvency law allows companies to pile up debts before entering liquidation.
The warranty backstop has an escape hatch
Mandatory home warranties were supposed to fill the gap. But government Cabinet papers revealed the requirement could be suspended for up to two years, extendable for a further two. Even where warranties exist, the insurance capacity behind them is not guaranteed. Lloyd’s of London, the primary underwriter, has warned that future capacity should not be assumed.
The NZ Initiative has argued that hundreds of millions of dollars are left owing annually to families, tradies and the tax department because directors are not forced to put firms into liquidation quickly enough. One documented case showed a builder evading $165,000 in debt through bankruptcy despite a personal guarantee and court order.
Confidence is already fragile
This matters for the sector because confidence is already thin. A March 2026 Industry Insider analysis of the 2025 National Specifier Survey found nearly 60 percent of respondents were unsure about their 2027 pipeline. Only 13 percent described it as strong. Fewer than half were confident that projects on hold would proceed. The analysis identified a steady flow of liquidations and insolvencies as a key driver of fragile sentiment.
New dwelling consents fell 26 percent in the year to January 2024 to 36,453, down from 49,200 the prior year. Total residential mortgage lending stood at $394.3 billion as of February 2026. The system is enormous, the pipeline is shrinking, and every high-profile deposit loss makes the next off-plan buyer more cautious.
Good operators pay for the bad ones
The market failure here is not subtle. When deposit protections are weak, buyers rationally demand discounts or avoid off-plan purchases entirely. That raises the effective cost of capital for legitimate developers. Lenders face higher risk on construction finance when buyer commitment is uncertain. The entire housing supply chain suffers because a handful of operators exploit a structural gap.
New Zealand Certified Builders has previously noted that fewer than ten live claims exist among its 2,300 members, with 80 percent resolved directly. The problem is not the industry. It is the absence of a mechanism to keep bad actors out of it.
The fix is not complicated. Deposits held in trust until settlement. Directors forced into liquidation before debts compound. Mandatory warranties without a four-year suspension clause. None of this is radical. Australia, the UK and most comparable markets already do some version of it. Until New Zealand catches up, every off-plan purchase carries a risk that the buyer alone absorbs.
Sources
- Home buyers who paid $2.03m deposits for never-built Massey houses express distress
- Compass Homes Western Bay of Plenty liquidation: Tauranga family loses more than half of $55k house deposit
- ‘It really ruined me’: Builder takes thousands of dollars, then vanishes
- Policy Movement, Money Supply Improved, So Why Is Construction Still Stuck? (2026-03-23)
- Building consents issued: January 2024 (2024-03-01)
- Home owners could be left exposed as Govt gives itself an out on requiring new-build warranties