James Kellow, the director of New Zealand Mortgages & Securities (NZMS), said 2021 is the best time to be a property developer in a generation despite the impacts of the COVID-19 pandemic on the property market and the four lockdowns in Auckland within the past 12 months.
Kellow stated that residential developers continue to see unprecedented sales, with well-designed and well-situated townhouses remaining popular in Auckland. Bureaucratic barriers are also at an all-time low.
“Developers are discovering that councils are a lot more can-do when it comes to consenting. I suspect that’s ultimately because they don’t want the government to take that authority away. Regardless, councils are now a lot more confident saying ‘yes’, helped by politicians and the public being more onboard,” Kellow said.
“Not so long ago, developers wanting to build affordable housing were public enemy number one in most neighbourhoods. Now with the country’s housing shortage viewed as almost a national emergency, developers promising attractive and integrated projects are positively working with council staff and communities to deliver some great results.”
Kellow explained that Auckland’s Unitary Plan, which promotes intensification and the release of land, has influenced more people to ditch their day jobs and focus on property development.
“There’s serious money to be made if they can buy a full site for $2 million, take the house off it, fully presell, and build 10 townhouses. They should be able to make at least a 20% profit. We’re happy to fund most of these developers 100% of the cost because effectively, the risk is almost zero,” he continued.
NZMS is currently financing one townhouse around Auckland, with 80% of the units sold within two weeks of the consent being granted. It expects Auckland Council to release more land sooner than forecast, partly due to the permitted density and height within urban areas often not being fulfilled by developers.
With new dwellings exempt from the LVR restrictions, demand and supply for residential developments will continue to flourish as borrowing for a new build is more reachable if serviceability can be proven, said Kellow.
“This property bubble is going to keep bubbling away for some time yet. What’s more, with the government indicating it will help more first-home buyers get on the property ladder that in turn will help the development sector,” he continued.