Lower risks in housing shortage
First-home buyers in Auckland could soon have more options as developers move from big-ticket, big-money projects to cheaper, sure-to-sell ventures.
James Kellow, director of New Zealand Mortgages & Securities (NZMS), Auckland’s biggest nonbank property financier, said affordable properties would be a big part of his firm’s future.
Affordable housing projects were more feasible in the city thanks to the Auckland Council’s Unitary Plan, he said.
Developers and financiers had also profited from the recent property boom, he said, and were willing to take lower returns with lower risk, on more modest developments.
‘‘They don’t take as much risk at the affordable end. There’s a surplus of unaffordable houses but still a deficit of affordable properties.’’
Developers would know they would be able to sell all their affordable properties, even if profit margins were slightly tighter.
‘‘Traditionally the tight supply and cost of land in Auckland has been the barrier for developers delivering affordable homes in good areas and making a margin along the way,’’ he said.
‘‘Now that the Unitary Plan allows for greater intensification in many market-attractive suburbs, the economics have suddenly got a whole lot better.
‘‘We’re now starting to see the construction of quality smaller homes on smaller sections. This is a real paradigm shift for Auckland and it’s exciting to be part of it.
‘‘A few years ago, I would never have imagined we’d be involved in affordable housing projects all around Auckland – Panmure, Mangere, Glen Eden, Henderson, Manurewa, Mangere, Takapuna and Northcote – but we are.’’
He said there was no housing shortage in Auckland, just an affordability crisis.
‘‘Anyone who can afford a house has one. It’s strange to say $500,000 or $600,000 is affordable but with low interest rates, it probably is. Interest rates are half what they were 10 years ago.’’
NZMS had backed a lot of developments in recent years, he said.
‘‘We’ve supported some massive subdivisions in areas like Glenbrook, Flat Bush, Pukekohe, and Warkworth, and some major apartment developments in both Auckland City and North Shore.
‘‘With a lot of those projects complete and repayments now coming in, by mid-year we’ll be set to reinvest nearly $150 million of capital from our current loan book of about $233m.’’