There appears to be no shortage of money available to finance new residential property developments, with an Auckland development finance company saying it has plenty of cash available and is looking for new projects to fund.
“Some developers are struggling to get capital, but we have plenty for viable projects,” says James Kellow, a director of New Zealand Mortgages & Securities (NZMS).
The company has a current loan book of about $200 million and had recently received $50 million in repayments from successfully completed projects and was due to receive another $128 million in the near future.
That meant it has around $75 million immediately available and looking for a home.
”We’re ready to fund new projects and remain very confident despite current global circumstances,” Kellow said.
“NZMS directors have been committed to Auckland’s growth for over 40 years, lending through the 1987 share market crash and subsequent recession and more recently the Global Financial Crisis."
NZMS is 40% owned by interests associated with Kellow with the other 60% held by interests associated with Auckland’s Manson family who are one of the country’s leading commercial property developers.
“Many lenders struggled with loan recoveries in the GFC, but these were almost all in provincial areas,” Kellow said.
“It is the critical mass of people living in Auckland that provides depth to the market and ongoing demand for better living environments.
“The residential developers financed by NZMS in recent years have enjoyed significant success in west and south Auckland, primarily with well-designed townhouse projects close to transport hubs,” he said.
NZMS had also financed some Kiwibuild projects.
“Kiwibuild gets a lot of criticism, but without doubt it has given many developers the confidence to get projects off the ground and is getting more people into housing,” Kellow said.
“I would argue that level of support is more important than ever.”
Kellow admitted that NZMS may charge more in interest than banks did for development finance, but the company could often seal deals more quickly than a bank could and NZMS would often require borrowers to contribute less equity than a bank would.
But at the moment it appears that the company has no shortage of money to lend, but is seeking developers with suitable projects to lend it to.
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15 Comments
They need to be very careful when lending this money ..........Covid-19 has not had its last laugh .
There are confidence issues at play right now
The economy will reel under the projected 80,000 job losses , and if it happens , residential sales could tank
There will be all sorts of pre-conditions with sure -fire pre-sales ( not the normal fudging ) before loans are granted
I am told of one construction firm based on the South Island with most if its work in Auckland who have 5 major projects all on hold , and which may not go ahead , as they have seen pre-sales collapsing
Not the case in Wellington. Can't get enough homes. Presales on housing developments sold within days.
And no I don't have a vested interest, just a lowly home buyer who keeps missing out despite cash offers.
Developers struggling now don't have any excuse except they got caught in the wrong market. If they built in wgtn they'd have buyers.
There's still a frustrating lack of houses for sale in Wellington - just as there has been for the past 5 years or so.
It sure is a sellers market.
https://www.stuff.co.nz/life-style/homed/first-homes/119147416/on-the-l…
Hmm, I really hope the developer got it sold and got $90,000 more, otherwise they would be regreting so much now.
That article is so old, I'm not sure if you're being ironic.
I also noticed serious lack of listing in some Auckland surburbs. This is probably hiding the fact that we have price reductions which i am hoping for. Holding costs are cheap at the moment and will be for a looooong time so can't really see this changing in the short term.
Extreme caution needed: in the midst of structural change (less B&M retail, fewer cube dwellers as WFH settles in to a permanent option, residential and FHB angst over personal prospects, commercial angst over vacancy rates and possibly permanently lower yields) - who'd be a Lender?
Nice free ad! Can you do one for me? I'll finance anything with low LTV or where a few extra dollars will get a project finished and sold.
Nice to see some positive comments regarding kiwibuild for a change. Although the middle class despises it, once covid turns the job market into a swiss cheese for the next 5 years, kiwibuild will suddenly be the next hot thing with the middleclass!
Houses still the "only show in town" now its Wellington. Why? I guess lots of government workers. Heres the problem as long as NZ promotes, encourages, defends houses as the best investment in NZ, then private capital is going to keep coming to non-productive house sector and debt will grow. The affordability equation is all about debt, not incomes, so RBNZ, and banks will keep dropping rates to keep the party going! NZ's productive future is in massive peril!
Yep and Germany represents the endgame. Interest rates fixed at 0.8% for 15 years. Nobody sells houses, nothing decent anyway. You cant buy a house for love nor money. It's common practice if you're looking to buy a house to befriend the agent and pay them a commission for finding you a house to buy. I think whats happening is a slow motion currency collapse.
Kiwibuild is just the thing now. The time for government building houses is counter-cyclically, not at peak employment. I think a chap called Keynes suggested something along the same lines. He has been rather misrepresented of late. Still, can't expect pollies or bureaucrats to understand advanced concepts like the business cycle, or the production function, or other naturally curvy relationships.
Just need a fair scheme for state housing tenants to buy out the government's share. Build then privatise. We need to be a nation of house owners again. Might be a good idea to employ a few kiwis to build them, too, of course.
Can they stop lending to shoebox housing developments. There cant be much upside in buying these. They put 10 to 20 little townhouses on sections now under unitary plan. People buying these will lose lot of money if they have to fire sell their house as a result of job losses or income reduction. Our younger generations with home ownership dreams could end up facing this nightmare scenario.
What could you build with $75m? Not much I say.
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