Tight lend­ing curb­ing sales

Manawatu Standard - Property Weekly - - Property -

One of New Zealand’s main real es­tate groups claims the ru­ral prop­erty mar­ket is be­ing sti­fled by a tight­en­ing of lend­ing cri­te­ria by the banks. First Na­tional Group gen­eral man­ager John Ste­wart says 90 per cent of the net­work’s ru­ral agents, ques­tioned for the group’s quar­terly sur­vey, have re­ported a de­cline in buyer in­ter­est at­trib­ut­able to tight lend­ing cri­te­ria.

Mr Ste­wart says the banks are de­mand­ing very high lev­els of eq­uity, and are still work­ing on the ba­sis of the $4 to $4.50 dairy pay­outs of ear­lier this year and late last year.

He adds that he won­ders whether the banks are re­ally par­tic­i­pat­ing in the eco­nomic re­cov­ery of New Zealand.

‘‘They are sit­ting there, wait­ing for the econ­omy to come away, so that they can do well out of it. Yet all of the big four [banks] have made sub­stan­tial prof­its this year, and one of them has made record prof­its at a time when ev­ery­body else, in ev­ery form of busi­ness I know in New Zealand, has been re­ally strug­gling.’’

The loss of such len­ders as South Can­ter­bury Fi­nance and Al­lied Na­tion­wide Fi­nance had given more power to the main bank len­ders, whose tight cri­te­ria had not yet been loos­ened in most parts of the coun­try.

‘‘Banks will claim they are rea­son­able. But the sheer num­ber of buy­ers los­ing hope, at the time of their pre­lim­i­nary in­quiry to their bank, shows that ac­cess to funds has not im­proved to the de­gree be­ing claimed.’’

PGG Wright­son real es­tate gen­eral man­ager Stu­art Cooper says the tight­en­ing of lend­ing cri­te­ria has oc­curred across all sec­tors.

‘‘The days of the banks partly driv­ing the mar­ket, as they did for the past 10 years, have gone.’’

This meant that al­though there was a lot of in­ter­est in ru­ral prop­er­ties, it was cau­tious in­ter­est that was tak­ing a long time to trans­late into sales.

In the year to June, only eight

The gen­eral man­ager of one of New Zealand’s main real es­tate groups says a tight­en­ing of lend­ing cri­te­ria by the banks has dis­cour­aged buy­ers in the ru­ral prop­erty mar­ket. prop­er­ties were sold for more than $10 mil­lion in the whole of New Zealand.

This made es­tab­lish­ing the true value of a prop­erty dif­fi­cult.

‘‘It’s well-known that val­ues have come back, but ex­actly what they have come back to is a moot point.’’

An­other prob­lem was the length of time it took to sell a farm, which had dou­bled from 80-90 days to 180 days when the credit crunch struck.

This had, how­ever, grad­u­ally re­duced as the ru­ral prop­erty mar­ket had slowly im­proved since the start of the year.

‘‘It’s now about 5 per cent up on where it was in Jan­uary,’’ Mr Cooper says in his as­sess­ment of the sit­u­a­tion.

The col­lapse of SCF and other fi­nance com­pa­nies had left small num­bers of very cau­tious in­vestors look­ing at the ru­ral prop­erty mar­ket.

BNZ Ti­maru se­nior ru­ral man­ager Steve Smith says lend­ing cri­te­ria de­mand a ro­bust cash­flow and good busi­ness gov­er­nance.

‘‘There are good op­er­a­tors out there who are look­ing at op­por­tu­ni­ties, and we’re pre­sent­ing of­fers of fi­nance to those good op­er­a­tors.’’

He says the BNZ uses $5.50/kg of milk solids as a bench­mark for any deals.

Over the long term, he says, that favours busi­nesses that are ro­bust enough to han­dle the volatil­ity in the dairy pay­out dur­ing the past few years.

Mean­while, he adds, peo­ple’s de­sire to bor­row money has greatly di­min­ished, as a re­sult of con­tin­u­ing ner­vous­ness caused by the re­ces­sion.

Mr Smith says ru­ral prop­erty val­ues have also dropped, and ven­dors are not ac­cept­ing what they per­ceive to be be­low-mar­ket prices for their prop­er­ties.

Photo: FAIR­FAX

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