UPDATED 1.02pm Yet another failed apartment block in Auckland has dimmed the dream for those still clinging to property hopes and developers are concerned it's because banks are getting jittery.

LISTEN ABOVE: NZ Herald property editor Anne Gibson spoke to Mike Hosking

The Flo apartments in Avondale, being developed by Jon Sandler, were billed as being affordable, starting at $375,000 each.

The project joins a list of 35 in Auckland which have collapsed this year.

Andrea Warmington was one of those who paid a deposit, she's shocked, disappointed, and said it was supposed to be her first home.

"It's just sad, I was really excited, I thought it was a really cool project and I can only hope something similar will come up in the future"

But she said it will be next to impossible to find another one in Auckland.

And it's a word of caution to those buying property off the blueprint... from the property developer himself.

Mr Sandler said he shares her devastation and urges buyers to be aware it's not always set in concrete, especially in this market, and especially with demand for apartments continuing to grow in Auckland.

He said the development is a casualty of banks rapidly cutting back on apartment projects.

"I think they may well be nervous - their books may be full and construction companies are also feeling the demand."

Mr Sandler said he's worried for others buying off the plan because banks won't fund a project until it's a certain way down the process.

"All they can do is keep trying but when the median hits half a million it makes it incredibly difficult."

The project had almost sold out - more than 80 of the 91 units had deposits paid.

"We hadn't set out to make a truck-load of money, we wanted to offer good quality entry level housing at an affordable price... but in the end the funding and bull price killed it."

All depositors will receive their money back.

Housing Minister Nick Smith said the building sector is growing strongly, and he's not worried about individual projects falling over.

Not every apartment proposal that's put forward, that tries to connect all the dots around finance, design, and other elements, is guaranteed to go ahead, he said.

Prime Minister John Key has stood by comments that people need to look to apartments as a first home option - despite the collapse in Auckland property projects.

"I think apartments are a very credible alternative for people to buy. For a whole variety of reasons - everything from convenience to affordability, Key said.

"While they [the developments] might not be happening, the consenting looks very strong...so from time to time you will always get a few developments that fall over.

"It is just as interesting fact that is there. I wouldn't take too much out of it.

"What is shows you is that there is always risk when it comes to property development. And it's one of the reasons why when people say, just fix the housing supply issues - it's never quite as simple as people say."

However, Green Party co-leader Metiria Turei said people's home-ownership dreams had been left it tatters, while the Government stood by.

"If rising construction costs are the issue, the Government should be looking at what it can do to make sure apartment builders have access to enough finance to cover construction costs.

"The market is clearly broken if developers trying to build affordable homes can't get enough finance, while property speculators can borrow easily to buy their fifth or sixth investment property."

Massey University's Dr Claire Matthews said the banking sector will have good reason to pull back on lending for property developments in Auckland.

If banks are withdrawing funding, they'll have good commercial reasons for doing so, she said. 

Dr Matthews said there could be better opportunities for that funding, or they could be concerned about the risks of lending too much in that particular portfolio.