Lenders look for KiwiBuild loan opportunities

Friday, 31 August 2018

Non-KiwiBuild work is drying up, one lender says.

Lenders are hoping KiwiBuild gives the building sector a burst of energy – and creates projects for them to put money into.

Although the plan to build 100,000 homes over 10 years is government-run, private developers will play a part.

The government has asked for expressions of interest from those who want to be involved in its 'buying off the plans' initiative, which involves the government underwriting or purchasing homes from plans the private sector is leading.

Some property developers had previously found it hard to get funding if they did not have sufficient sales upfront for private projects, but KiwiBuild avoids that issue because the government is guaranteed to step in to purchase properties up if owners are not found.

* About 4300 people keen on a Hamilton KiwiBuild home

* Where KiwiBuild is at with one year to build 1000 houses

* Government asks to buy developers' plans to contribute to KiwiBuild target**

The government offers to buy 80 per cent of a development's properties at a 5 per cent discount, and to settle six months after work finishes.

This allows the developer to continue to market the project, with access to registered KiwiBuild clients, in the meantime.

Earlier this year, developers were asked to submit projects that would start over the next two years. Later in the year, it will look for developments that will start in future years.

New Zealand Mortgages & Securities director James Kellow said, if the government wanted to deliver 100,000 homes, it would need to focus on the private sector.

He said there was significant funding available because many of the deals banks and finance companies had done for developers in recent years had been repaid.

'Everyone is waiting for KiwiBuild. We would have had $130 million repaid in the last six months, we could do $180m in new deals but we are waiting for KiwiBuild to start signing up.'

He said his loan book used to be $250 million but was now $120m. 'We'll get back to that bigger size only through KiwiBuild. Without KiwiBuild there won't be that much development. There are no buyers for $1 million homes – everyone who can afford a house in Auckland has got one.'

The number of new homes consented fell 10 per cent in July, seasonally adjusted, following an 8.2 per cent fall in June. ASB economists said, at a national level, building activity was probably close to a peak.

Banks were also interested in the opportunity presented by KiwiBuild.

An ANZ spokeswoman said the bank had been in discussion with the Ministry of Business, Innovation an Employment from a retail and development funding perspective. 'We have a strong appetite for lending that meets our criteria.'

Westpac's New Zealand head of home ownership Mark Dunmore said the bank was looking forward to working with developers to support KiwiBuild. 'We don't anticipate any issues around funding capacity. We assess all funding proposals on their merits and in line with our lending criteria.'