The curse of Newcastle's Empire Hotel site has struck again after the land's latest owner shelved plans for the Onyx high-rise apartments due to slow sales.
Warwick Miller, whose firm is building the Verve apartments around the corner in King Street, said he had refunded clients' deposits with interest and agreed to pay "reasonable" legal fees.
"I figure there's no point in us hovering around for a year and keeping people going in the hope that we'll eventually sell enough to start it," he said on Monday.
"These sunset clauses are such that can you imagine paying a deposit on a unit and not seeing it start for two years. I don't think that's fair to the buyers."
Newcastle unit prices have dropped eight per cent since their peak amid tighter bank lending and a downturn in the national housing market, according to data from property analysts CoreLogic.
Mr Miller said harbour-side units would continue to attract strong interest - his company recently bought the Lee 5 site from the state government - but doubted some "B-grade" apartment projects away from the water would go ahead.
"It's very hard for me to imagine, and this is me talking, anybody starting a new project in B-grade residential in the town," he said.
"Some people are probably questioning the prices as they're dropping, 'Why would you want to buy now?'
"Overall, if you could say one thing about the market, the market's down because of people's inability to borrow. It's changed everything."
Property Council regional director Anita Hugo said it was "increasingly difficult for investors to access finance, so this will be driving some patterns".
GWH director Jonathan Craig disputed Mr Miller's view of buyer demand, saying his firm's 18-storey Sky Residences project was selling well and the firm was "quietly confident" of starting construction in the middle of this year.
Mr Miller said apartments with a view in the 15-storey Onyx development had sold well, but smaller, lower units had not proved as popular.
The Empire Hotel site, opposite KFC, had been a haven for squatters and drug users before the state government bought it in 2010 and knocked it down.
Previous owners had proposed a range of 12- and 15-storey developments, but none eventuated. City of Newcastle and Hunter Development Corporation agreed in 2014 to partner with the NewcastleFirst consortium to build affordable housing and apartments for people with a disability on the site.
This project fell over in 2015 before the Catholic diocese revived it in 2016 after paying HDC $2.8 million.
The church plan then folded, too, and the diocese made a hefty $5.5 million profit when it sold the block to Miller Property Corporation early last year.
Mr Miller said he believed the next proposal for the site would be for student accommodation.
"I'm not at liberty to say at this stage. I believe it won't be built with that [existing] DA. There's been a proposal made by an alternative group.
"Nobody at the moment would try and build apartments there. Wrong timing, too much else on the market, and my numbers show there was a carryover of about 800 units from last year into this year.
"If you're only going to sell 200 units off the plan in 2019, you'll carry another 600 from what's already on the market."