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CLIENT NEWS: Bay of Plenty housing developers turning to non-bank lending to help build houses

Land developers and builders are increasingly turning to non-bank lending to be able to develop new homes for the Bay of Plenty.

Omega Capital Corporation Ltd provides finance and equity solutions for developers, farms, businesses and more. It says it’s seen an increase in the number of land developers and builders in the Bay of Plenty region who are seeking finance and that would traditionally have been bank clients.

The latest QV House Price Index Report shows Tauranga home values have risen 4.5% from March 2017 to March 2018, and 8% in the Western Bay of Plenty in that time. Tauranga and its surrounds are popular with families moving from larger cities, placing additional demands on the housing stock. In Tauranga City, sale prices are about 40% higher than CVs.

Omega Capital Director Scott Massey says the credit squeeze of the past two years means there’s now a large number of very good developers to whom banks are no longer extending credit, and that’s impacting directly on the housing supply issue in New Zealand. “The biggest thing restricting house building in New Zealand is finance, in our opinion. The demand is there for the homes to be built, but not the loan funds for these developers and house builders and in some cases the home buyers.”

He says Omega Capital is being approached by existing land developers and builders looking to secure loans so they can continue to create homes in the Bay of Plenty, particularly around popular areas such as Papamoa.

“We would have established at least 10 new clients in the Bay of Plenty area in the past year who have previously accessed bank lending for their developments but are now being turned away because of the credit squeeze.”

Massey says there aren’t many operators in the alternative lending market, but the option of non-bank lending has always been available. Omega Capital, for example, has interest rates starting at 6% and loans between $200,000 and $20 million.

“We used to have this attitude in New Zealand that the bank was king, but now that we have this serious problem with getting credit, we’re finding many more people fit the criteria and are getting great results via alternative lending.”

Massey says the New Zealand housing market is estimated to be worth $1 trillion, but the country has a housing shortage. “If we want to solve our housing supply crisis, we need to be supporting those who are prepared to develop new housing stock for the benefit of many New Zealanders.”

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