The government must tap into the non-bank market if it wants to hit its targets, says director
The government needs to seal more deals with private lenders if it wants to hit its KiwiBuild targets, according to New Zealand Mortgages & Securities (NZMS) director James Kellow.
Funding has been one of the biggest issues facing KiwiBuild since its inception, and Kellow believes private funding would create a ‘tidal wave’ of deals and properly kick-start affordable housing construction. If the government set itself up as the main guarantor and provided proper incentives, Kellow says it could reasonably achieve its goal of 100,000 new homes within a decade.
“NZMS has two live KiwiBuild deals with the government where it is underwriting approximately two thirds of the development,” Kellow told NZ Adviser. “If we can’t sell the homes to KiwiBuild buyers within their price ranges, the development will be brought at a 5% discount and settle six months after completion.”
“The government has been slow to sign deals so far, but they could easily underwrite around a thousand units a month,” he explained. “That would get them to 12,000 per year. Once they’ve done six or seven deals we would hope to see a tidal wave of others following on. They are generally on the right track, but they do need to be prodded along.”
According to Kellow, KiwiBuild projects should be a mix of large and small developments to attract a broad range of lenders willing to invest, and Auckland affordable housing should be constructed near key public transport routes. With the levelling real estate market and relatively low interest rates, he says now is a highly opportune time to pull off a project like KiwiBuild.
“If you’re talking $600,000 homes, the required deposit gets a lot more achievable, particularly if first-home buyers can access KiwiSaver HomeStart grants,” he said in a statement. “Things are definitely getting a lot more doable for the likes of a working couple, and that’s definitely sparking interest among this market segment.”
“NZMS has the experience as well as the capital and scale to support the region’s largest transactions. A big part of our plan also consists of hopefully helping the government deliver much needed affordable housing via KiwiBuild.”
