Real estate lender throws in $600 million for Kiwibuild revival

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The government’s latest changes to its Kiwibuild scheme will make a real difference for developers and those looking for an affordable home, said James Kellow, New Zealand’s director of mortgages and securities.

The changes include an increase in the price caps for one to three bedroom Kiwibuild homes, with the price cap for a three bedroom Kiwibuild property in Auckland rising from $650,000 to $860,000.

Although Kiwibuild has drawn a lot of criticism, the changes will now give developer customers the confidence and support to start projects and the program a much-needed boost. The latest changes also include the lifting of income thresholds for buyers.

Auckland developers have struggled to get Kiwibuild to work for the past two years. It hasn’t been a competitive option, simply because the price caps haven’t been commensurate with what it costs to build the houses.

However, $860,000 is now actually achievable for Auckland property developments. I firmly believe that lifting the price caps will be successful, leading to the construction and delivery of many more Kiwibuild homes.

Kiwibuild involves the government underwriting a portion of the houses in new residential developments. In return, developers agree to sell subscribed homes at or below Kiwibuild price caps.

So far, 1,380 Kiwibuild houses have been built, with 1,223 under construction. Most previously completed Auckland Kiwibuild homes have been financed by New Zealand Mortgages & Securities (NZMS).

Following the latest changes from Housing Minister Megan Wood, Auckland’s largest non-bank development financier, NZMS, has now announced a dedicated Kiwibuild fund for eligible developers.

The NZMS has allocated funding of $600 million, available to build around 1,000 Kiwibuild homes for residential development projects in Auckland commencing before the end of 2023.

If the developers have the sites, we will support a partnership with Kiwibuild and provide up to 100% of developer funding needs. Kiwibuild is all about unlocking development potential and advancing construction dates, and that’s why we’re getting our hands dirty now.

NZMS has previous experience on previous successful Kiwibuild projects in Papakura, Wattle Downs, Henderson and Glen Eden in Auckland.

NZMS likes to support Kiwi developers, with our lending book increasingly favoring higher density affordable townhouse projects. Kiwibuild’s changes now give us real confidence to make more money available for good projects that will now add up.

The government announcement makes Kiwibuild more feasible for lenders and developers and that just means more affordable new homes. This is a welcome boost for the residential development sector.

James Kellow is Director of New Zealand Mortgages & Securities (NZMS) – Auckland’s largest non-banking development financier.

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