Govt was urged to include developers in loan scheme Auckland rents close on $600
WELLINGTON: Treasury twice urged the Government not to exclude property investors from a Government loan guarantee scheme, arguing it could stymie rent relief for businesses and run counter to the aim of building more houses.
But the Government appears to have been resolute in its refusal to allow the funding to be used to lend money to commercial or residential property owners or developers.
While the Government says the aim was to provide money to more productive parts of the economy, National says the move is not consistent with its aim of increasing house building.
A commercial property owner said the exclusion is purely ideological and makes landlords equivalent to industries such as tobacco, arms dealers and pornography.
Before the nationwide lockdown in March 2020, the coalition pledged to underwrite 80% of the $6.25 billion business finance guarantee scheme (BFGS), aimed at continuing the flow of lending to businesses.
Initially intended to provide working capital, a series of the conditions of the BFGS have been removed or relaxed, from allowing the money to be used on capital expenditure, to allowing banks to use the money in part to refinance existing loans, to lengthening the term and maximum size of the loans.
After initially excluding loans to farmers, the sector was later included, while the maximum turnover of businesses able to access the scheme was raised from $80 million to $200 million.
But investment in property — either residential or commercial — as well as property development was excluded, despite Treasury calling for the sector to be included.
Late on Friday afternoon Treasury released advice it provided the Government in June arguing that while loans to commercial property had historically been a source of losses for banks, credit conditions for the property sector were expected to tighten making speculative loans under the scheme unlikely.
‘‘[The Reserve Bank] observes that in recent years that banks have tightened lending standards to both commercial property investor[s] and developers. Given this, and the Government’s recent introduction of a Covid19 rent relief clause into some commercial leases, we recommend removing this exclusion,’’ Treasury officials said.
‘‘Loans to property developers generally have a higher risk of default. However, excluding developers may not be consistent with the Government’s objective of increasing housing supply and affordability.’’
Documents previously released showed Treasury had earlier warned that property investors may have empty buildings, while excluding the sector may mean less is offered to tenants in the form of rent relief.
But Finance Minister Grant Robertson rejected Treasury’s recommendation and is now saying the basis for the exclusion was productivity.
‘‘The intention is to keep investment directed towards more productive sectors of the economy,’’ Mr Robertson said in a statement.
‘‘The Government is not looking to provide more advantages for developers.’’
National’s finance spokesman Andrew Bayly said he could understand why investment in residential property might be excluded given the surge in house prices and availability of credit to buy houses, but excluding property developers during a housing shortage did not make sense.
‘‘If you talk to any developer trying to develop property, unless you’ve got a long, long history, the banks have been saying for the past six to eight months ‘we won’t lend to you’,’’ Mr Bayly said.
‘‘It’s not really consistent with the need for more houses.’’
Troy Bowker, executive chairman of Caniwi Capital which owns a range of investments including commercial property, said the BFGS treated property investors as ‘‘the equivalent of weapons dealers and the tobacco industry’’.
Mr Bowker was pointing to the relatively small number of industries which are not allowed access to the BFGS. Apart from councils or councilcontrolled organisations, the only expressly excluded businesses are those which manufacture weapons and tobacco, process whale meat or grow or distribute recreational cannabis or engage in illegal activity. — The New Zealand Herald
AUCKLAND: Residential rents in Auckland have hit an alltime high and are forecast to climb further soon to an average $600 a week.
Kiri Barfoot, a Barfoot & Thompson director, said average weekly rents rose about $12 a week to reach a high of $595 a week. She expects them soon to be $600 a week and said rents rose 2% annually.
‘‘Auckland’s average rent was $595 a week at the end of 2020, just shy of a longanticipated $600 per week,’’ she said.
The figure is based on rents paid during December for about 16,500 properties, including new and existing tenancies, managed by the agency.
‘‘We have long suspected the market would hit the $600 mark during 2020 and while this was dampened somewhat by the effects of lockdown, the momentum continued among newly signed tenancies,’’ she said.
‘‘Activity during this quarter was also not constrained by the rent freeze, which ended in late September, and we’ve seen a slight lift in average prices across the board,’’ she said.
The rise is a return to a more normal pace, on a par with December 2019’s increase of 2.1% yearonyear, which also equated to around $12 more per week, she said.
Threebedroom homes — the majority of Auckland’s rental stock — are a market benchmark and it was that size which attracted the December $597 a week.
Rents for fiveplus bedrooms were relatively static with less than 1% movement, she said.
Property managers are reporting increased activity and listings, and high numbers of prospective tenants are attending viewings.
The biggest rental shakeup in 35 years takes effect next month.
Some investors in the $180 billion sector are wondering what effect the Residential Tenancies Amendment Act 2020 will have when it bars nocause terminations and allows ‘‘minor changes’’ at rental properties as long as both parties agree. — The New Zealand Herald