Development market needs deft hand
Property development is at something of a crossroads – but ASAP can point brokers and developers in the right direction to embrace the opportunities and avoid the pitfalls
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DEVELOPERS ARE having to pivot as the New Zealand property market struggles in the long winter created by the high interest rate environment.
The post-pandemic property drama has continued for longer than many had hoped, and this is now starting to sort the wheat from the chaff in terms of what kinds of products are viable.
“It’s really the experienced developers that are doing well in this market. Previously you could build anything, and it would sell – now, it’s all about attention to detail,” says Ben Friedlander, lending manager at property finance specialist ASAP Finance.
“There is a new norm – well-thought-out product that is appropriately priced seems to be selling.”
Friedlander sees today’s market as much more nuanced, with expertise at a premium.
On the one hand, credit is more available than it was a year ago when loan books were full at most lenders nationwide, he says. “There are still some great opportunities presenting themselves, and we are actively looking for projects to fund. In fact, February 2024 was our strongest month on record, settling $90 million of new lending.”
Recent moves to restore interest rate deductibility for landlords may also provide a tailwind.
On the other hand, there are pitfalls waiting for anyone hoping to rush in like it’s 2021.
“There’s a lot of competition and surplus stock in the market, so you really don’t want to be competing on price alone. Otherwise, it’s just a race to the bottom. Our more successful clients are finding ways to deliver value, not just cut costs.”
“If we can find ways to mitigate risk, or speed up the construction project, then it’s a win-win. When a project is a success, clients will be more inclined to come and borrow from us again,” says Friedlander.
“ASAP is privately owned and operated and is a non-deposit taking institution. This means we can decide on the level of risk we wish to accept, what conditions we impose and the types of projects we wish to fund. We have the freedom to stretch loan-to-value ratios or fund a higher percentage of total development costs.”
ASAP can step outside the boundaries that constrict traditional banks to meet customer needs on projects where the numbers justify going the extra mile.
It also offers other advantages that can speed up development funding approval for clients. ASAP doesn’t need presales to fund a project and doesn’t require a quantity surveyor (QS) to be appointed to a project, for example.
This build-up of stock is not uniform across New Zealand, leaving a lacuna in certain geographical areas that are still worth investing in with the right partner. Not surprisingly, banks and non-banks alike are getting more selective with the projects they are looking to fund.
“The surplus stock in the market [means] some lenders are already treading more carefully.”
StatsNZ data shows the number of new dwellings consented is at a multiyear low, down 26% in the year to January versus the prior 12-month period. Compared to other industries, construction firms continue to lead insolvencies, and conditions are likely to remain tough for many due to the inflationary effects of the cost of labour and materials.
However, mirroring trends in Australia, commercial developments are on the rise as businesses adopt strategies to cater to the growth of online shopping, or mitigate supply chain woes by building more warehouses to hold stock locally. This increase in industrial investment contrasts with the falling value of consents for offices in the post-pandemic environment on the back of changes in working styles and living habits.
ASAP Finance is one of New Zealand’s leading non-bank lenders and a specialist development and construction funder. Since 2004, we have partnered with investors, developers and builders to provide innovative and competitive property funding solutions. Our unique team combines in-depth industry knowledge with practical development experience to cater to all aspects of your funding requirements. Since inception, we are proud to have facilitated over $3 billion in funding for our clients nationwide. In addition to first mortgage lending, ASAP Finance offers value-add development finance services such as presale underwriting and joint venture opportunities.
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Friedlander says a granular and highly local knowledge of the market is important to project success in the current environment, right down to which street a building is on in some cases.
“Whether it is northern-facing or western-facing, school zones, typology, liveability … knowing your target market is critical to delivering the right project,” Friedlander says.
While this might seem like development 101 material to some, many of these criteria were blithely ignored after the Reserve Bank of New Zealand opened the money spigots wide during the COVID crisis. There was a time when a throw-spaghetti-against-the-wall-and-see-what-sticks approach was common.
“Being able to waive a QS is a huge benefit to our clients. It removes an unnecessary layer of compliance and speeds up the funding process. We undertake a site visit and release funds against pre-agreed milestones. Many of our clients are builders or project managers who are very capable.”
“[At ASAP] clients get direct access to people with the ability to make the decision. This means things can happen fast compared to banks, which are riddled with hierarchy and compliance”
Ben Friedlander,
ASAP Finance
Industry expert
Christopher Lee
MFAA head credit adviser, Finsure Finance and Insurance
Stewart Saunders
Heritage Bank
Darren McLeod
Beyond Bank
Ben Friedlander
ASAP Finance
Industry expert
As a lending manager at ASAP Finance, Ben Friedlander helps investors, developers and home builders turn their vision into reality. With over six years of experience in the non-bank lending sector, he has a proven track record of delivering tailored and flexible solutions for development finance, bridging loans, vacant land acquisitions, underwrites and joint ventures. He oversees every aspect of the lending life cycle, from business development to credit analysis and loan management. Friedlander holds a Bachelor of Commerce and a National Certificate in Real Estate (Salesperson) Level 4 and has a diverse background in business, including experience in the funds management, legal and property sectors.
ASAP Finance
Ben Friedlander
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Velit egestas vel ornare pellentesque ridiculus. Mauris tempor augue quis mattis suspendisse feugiat commodo posuere. Faucibus massa adipiscing nullam elit, ac vel accumsan. Phasellus eget ac dignissim fermentum ac placerat elit, metus. Nulla porttitor ante egestas molestie quis quam. Pharetra magna sit mauris tellus gravida rutrum libero sit. Justo orci cras euismod proin massa lorem ut. In non tellus phasellus faucibus ullamcorper nullam odio dui et.
Beyond Bank
Darren McLeod
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Velit egestas vel ornare pellentesque ridiculus. Mauris tempor augue quis mattis suspendisse feugiat commodo posuere. Faucibus massa adipiscing nullam elit, ac vel accumsan. Phasellus eget ac dignissim fermentum ac placerat elit, metus. Nulla porttitor ante egestas molestie quis quam. Pharetra magna sit mauris tellus gravida rutrum libero sit. Justo orci cras euismod proin massa lorem ut. In non tellus phasellus faucibus ullamcorper nullam odio dui et.
Heritage Bank
Stewart Saunders
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Tellus in penatibus condimentum malesuada ante vulputate nisi, arcu leo. Amet urna sapien purus vestibulum fermentum a. Cursus metus massa donec sed varius. Nunc enim sit morbi lacus, molestie et nunc. Nullam sed facilisi id malesuada. Ante purus velit, quam scelerisque ultrices scelerisque donec.
Velit egestas vel ornare pellentesque ridiculus. Mauris tempor augue quis mattis suspendisse feugiat commodo posuere. Faucibus massa adipiscing nullam elit, ac vel accumsan. Phasellus eget ac dignissim fermentum ac placerat elit, metus. Nulla porttitor ante egestas molestie quis quam. Pharetra magna sit mauris tellus gravida rutrum libero sit. Justo orci cras euismod proin massa lorem ut. In non tellus phasellus faucibus ullamcorper nullam odio dui et.
MFAA head credit adviser, Finsure Finance and Insurance
Christopher Lee
Christopher Lee
MFAA head credit adviser, Finsure Finance and Insurance
Stewart Saunders
Heritage Bank
Darren McLeod
Beyond Bank
Ben Friedlander
ASAP Finance
Industry expert
As a lending manager at ASAP Finance, Ben Friedlander helps investors, developers and home builders turn their vision into reality. With over six years of experience in the non-bank lending sector, he has a proven track record of delivering tailored and flexible solutions for development finance, bridging loans, vacant land acquisitions, underwrites and joint ventures. He oversees every aspect of the lending life cycle, from business development to credit analysis and loan management. Friedlander holds a Bachelor of Commerce and a National Certificate in Real Estate (Salesperson) Level 4 and has a diverse background in business, including experience in the funds management, legal and property sectors.
ASAP Finance
Ben Friedlander
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Tellus in penatibus condimentum malesuada ante vulputate nisi, arcu leo. Amet urna sapien purus vestibulum fermentum a. Cursus metus massa donec sed varius. Nunc enim sit morbi lacus, molestie et nunc. Nullam sed facilisi id malesuada. Ante purus velit, quam scelerisque ultrices scelerisque donec.
Velit egestas vel ornare pellentesque ridiculus. Mauris tempor augue quis mattis suspendisse feugiat commodo posuere. Faucibus massa adipiscing nullam elit, ac vel accumsan. Phasellus eget ac dignissim fermentum ac placerat elit, metus. Nulla porttitor ante egestas molestie quis quam. Pharetra magna sit mauris tellus gravida rutrum libero sit. Justo orci cras euismod proin massa lorem ut. In non tellus phasellus faucibus ullamcorper nullam odio dui et.
Beyond Bank
Darren McLeod
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Tellus in penatibus condimentum malesuada ante vulputate nisi, arcu leo. Amet urna sapien purus vestibulum fermentum a. Cursus metus massa donec sed varius. Nunc enim sit morbi lacus, molestie et nunc. Nullam sed facilisi id malesuada. Ante purus velit, quam scelerisque ultrices scelerisque donec.
Velit egestas vel ornare pellentesque ridiculus. Mauris tempor augue quis mattis suspendisse feugiat commodo posuere. Faucibus massa adipiscing nullam elit, ac vel accumsan. Phasellus eget ac dignissim fermentum ac placerat elit, metus. Nulla porttitor ante egestas molestie quis quam. Pharetra magna sit mauris tellus gravida rutrum libero sit. Justo orci cras euismod proin massa lorem ut. In non tellus phasellus faucibus ullamcorper nullam odio dui et.
Heritage Bank
Stewart Saunders
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Tellus in penatibus condimentum malesuada ante vulputate nisi, arcu leo. Amet urna sapien purus vestibulum fermentum a. Cursus metus massa donec sed varius. Nunc enim sit morbi lacus, molestie et nunc. Nullam sed facilisi id malesuada. Ante purus velit, quam scelerisque ultrices scelerisque donec.
Velit egestas vel ornare pellentesque ridiculus. Mauris tempor augue quis mattis suspendisse feugiat commodo posuere. Faucibus massa adipiscing nullam elit, ac vel accumsan. Phasellus eget ac dignissim fermentum ac placerat elit, metus. Nulla porttitor ante egestas molestie quis quam. Pharetra magna sit mauris tellus gravida rutrum libero sit. Justo orci cras euismod proin massa lorem ut. In non tellus phasellus faucibus ullamcorper nullam odio dui et.
MFAA head credit adviser, Finsure Finance and Insurance
Christopher Lee
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Both tailwinds and headwinds in current market
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Ben Friedlander
ASAP Finance
Darren McLeod
Beyond Bank
Stewart Saunders
Heritage Bank
Christopher Lee
MFAA head credit adviser, Finsure Finance and Insurance
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Tellus in penatibus condimentum malesuada ante vulputate nisi, arcu leo. Amet urna sapien purus vestibulum fermentum a. Cursus metus massa donec sed varius. Nunc enim sit morbi lacus, molestie et nunc. Nullam sed facilisi id malesuada. Ante purus velit, quam scelerisque ultrices scelerisque donec.
Velit egestas vel ornare pellentesque ridiculus. Mauris tempor augue quis mattis suspendisse feugiat commodo posuere. Faucibus massa adipiscing nullam elit, ac vel accumsan. Phasellus eget ac dignissim fermentum ac placerat elit, metus. Nulla porttitor ante egestas molestie quis quam. Pharetra magna sit mauris tellus gravida rutrum libero sit. Justo orci cras euismod proin massa lorem ut. In non tellus phasellus faucibus ullamcorper nullam odio dui et.
MFAA head credit adviser, Finsure Finance and Insurance
Mark HarChristopher Leeon
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Tellus in penatibus condimentum malesuada ante vulputate nisi, arcu leo. Amet urna sapien purus vestibulum fermentum a. Cursus metus massa donec sed varius. Nunc enim sit morbi lacus, molestie et nunc. Nullam sed facilisi id malesuada. Ante purus velit, quam scelerisque ultrices scelerisque donec.
Velit egestas vel ornare pellentesque ridiculus. Mauris tempor augue quis mattis suspendisse feugiat commodo posuere. Faucibus massa adipiscing nullam elit, ac vel accumsan. Phasellus eget ac dignissim fermentum ac placerat elit, metus. Nulla porttitor ante egestas molestie quis quam. Pharetra magna sit mauris tellus gravida rutrum libero sit. Justo orci cras euismod proin massa lorem ut. In non tellus phasellus faucibus ullamcorper nullam odio dui et.
Heritage Bank
Stewart Saunders
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Tellus in penatibus condimentum malesuada ante vulputate nisi, arcu leo. Amet urna sapien purus vestibulum fermentum a. Cursus metus massa donec sed varius. Nunc enim sit morbi lacus, molestie et nunc. Nullam sed facilisi id malesuada. Ante purus velit, quam scelerisque ultrices scelerisque donec.
Velit egestas vel ornare pellentesque ridiculus. Mauris tempor augue quis mattis suspendisse feugiat commodo posuere. Faucibus massa adipiscing nullam elit, ac vel accumsan. Phasellus eget ac dignissim fermentum ac placerat elit, metus. Nulla porttitor ante egestas molestie quis quam. Pharetra magna sit mauris tellus gravida rutrum libero sit. Justo orci cras euismod proin massa lorem ut. In non tellus phasellus faucibus ullamcorper nullam odio dui et.
Beyond Bank
Darren McLeod
As a lending manager at ASAP Finance, Ben Friedlander helps investors, developers and home builders turn their vision into reality. With over six years of experience in the non-bank lending sector, he has a proven track record of delivering tailored and flexible solutions for development finance, bridging loans, vacant land acquisitions, underwrites and joint ventures. He oversees every aspect of the lending life cycle, from business development to credit analysis and loan management. Friedlander holds a Bachelor of Commerce and a National Certificate in Real Estate (Salesperson) Level 4 and has a diverse background in business, including experience in the funds management, legal and property sectors.
ASAP Finance
Ben Friedlander
Published 08 Apr 2024
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In such an environment, it may be non-banks like ASAP that have the flexibility and willingness to work closely with customers to find tailored solutions that suit the subtle realities of unique projects in a changing market.
“Personalised customer experience and customised loan structures are key characteristics of non-bank funding. We are a small organisation, and clients get direct access to people with the ability to make the decision. This means things can happen fast compared to at banks, which are riddled with hierarchy and compliance,” says Friedlander.
ASAP invests a lot of time in understanding the ins and outs of a project before committing funding. If a project doesn’t fit the standard model, ASAP’s default position is to spend time seeking possible workarounds rather than putting it straight into the ‘reject’ pile.
“We spend a lot of time getting to know our clients’ projects. This enables us to give meaningful feedback during the project that will help contribute to its success.”
For example, ASAP will review the project design, expected build quality and valuations, and assess other competing product in the area before committing.
Time is ripe for something out of the box
Friedlander has seen the market move from the dizzying heights of 2021 to the very difficult conditions of early 2023, and how various developers have tried to adjust.
“A year ago, interest rates were rising fast and property prices were pulling back – it was a very challenging environment for developers.”
Many were forced to go back to the drawing board as their projects under consideration no longer stacked up given the higher rates. Some tried typologies outside of the standard two-bedroom, one-bathroom format, while others looked for new ways to market projects.
The RBNZ’s stabilisation of interest rates since May last year has created a much-needed reference point for developers.
“It was really needed as it gave developers something to hang their hat on. You need to have confidence in your feasibilities to move forward with a project, and that is very difficult when either sale prices or costs are moving against you,” says Friedlander.
Even so, many areas of the market are likely to continue to struggle while rates remain high.
“The $1.5 to 2.5 million range of the market has struggled, perhaps more so than other areas. A typical buyer in this price bracket would still require a mortgage; however, with rates so high, retail buyers are finding it difficult to service.”
The detailed knowledge of the market required in development finance can scare off brokers who don’t have a reliable source of expert advice to guide them.
“Getting into development funding can be daunting for many brokers,” says Friedlander. “I think there is a conception that it’s too time-consuming and/or complicated.”
But this is not a bad thing – as the saying goes, he who knows that he knows not can be taught. “The first step is knowing what questions to ask.”
ASAP undertakes detailed analysis for every client transaction, which means brokers can quickly get a feel for its risk appetite and the kinds of projects it considers viable.
“It’s a lot of work, but it allows us to present clean funding offers without the traditional hurdles imposed by banks,” says Friedlander.
It also allows brokers to learn quickly about how development finance works.
“We are really excited about what this year will bring.”
A quickly changing tide for property
Source: StatsNZ
*Seasonally adjusted
Change in volume of building work
put in place in NZ*
Dec 21
Mar 22
Jun 22
Sep 22
Dec 22
Mar 23
Jun 23
Sep 23
Dec 23
QUARTER
RESIDENTIAL
NON-RESIDENTIAL
7%
1.8%
0.2%
4.6%
-3.8%
-4%
0.7%
0.3%
-2.4%
12.2%
-3.1%
3.1%
10.1%
-1.4%
3.4%
3.7%
-3.6%
4.6%
Source: StatsNZ
New dwellings consented
Jun 2019
Sep 2019
Dec 2019
Mar 2020
Jun 2020
Sep 2020
Dec 2020
Mar 2021
Jun 2021
Sep 2021
Dec 2021
Mar 2022
Jun 2022
Sep 2022
Dec 2022
Mar 2023
Jun 2023
Sep 2023
Dec 2023
Jan 2024
MONTH
3,078
3,312
3,223
2,663
3,325
3,269
3,859
3,891
4,089
4,239
4,220
4,610
3,973
4,248
3,697
3,438
3,315
2,755
2,757
2,514
SEASONALLY ADJUSTED
2,887
3,347
2,955
2,915
3,477
3,605
3,751
4,222
4,316
4,521
4,128
5,303
4,037
4,600
3,457
3,971
3,402
2,898
2,487
1,991
ACTUAL
3,100
3,185
3,114
3,053
3,175
3,407
3,833
4,014
4,124
4,187
4,227
4,323
4,155
4,043
3,726
3,396
3,185
2,893
2,662
2,601
TREND
2,887
3,347
2,955
2,915
3,477
3,605
4,222
4,037
4,600
1,991
2,487
2,898
3,402
3,971
3,457
5,303
4,128
4,521
4,316
3,751
3,312
2,755
2,757
2,514
3,315
3,438
4,248
3,697
3,973
4,239
4,089
3,891
3,859
3,269
2,663
3,223
3,078
3,325
4,220
4,610
3,185
4,124
4,187
4,227
4,323
4,043
3,396
3,185
2,601
2,893
3,726
4,155
4,014
3,175
3,407
3,053
3,100
3,114
3,833
2,662
New dwellings consented
2,887
3,347
2,955
2,915
3,477
3,605
4,222
4,037
4,600
1,991
2,487
2,898
3,402
3,971
3,457
5,303
4,128
4,521
4,316
3,751
3,312
2,755
2,757
2,514
3,315
3,438
4,248
3,697
3,973
4,239
4,089
3,891
3,859
3,269
2,663
3,223
3,078
3,325
4,220
4,610
3,185
4,124
4,187
4,227
4,323
4,043
3,396
3,185
2,601
2,893
3,726
4,155
4,014
3,175
3,407
3,053
3,100
3,114
3,833
2,662
Source: StatsNZ
New dwellings consented
2,887
3,347
2,955
2,915
3,477
3,605
4,222
4,037
4,600
1,991
2,487
2,898
3,971
3,457
5,303
4,128
4,521
4,316
3,751
3,185
4,124
4,187
4,227
4,323
4,043
3,726
4,155
4,014
3,175
3,407
3,053
3,100
3,114
3,833
Source: StatsNZ
New dwellings consented
3,396
3,185
2,601
2,893
2,662
3,312
2,755
2,757
2,514
3,315
3,438
4,248
3,697
3,973
4,239
4,089
3,891
3,859
3,269
2,663
3,223
3,078
3,325
4,220
4,610
3,402