Worse housing crisis looms

10 March 2022
Worse housing crisis looms

Omega Capital says inconsistent Government legislation is ‘tying developers’ hands’ – worse housing crisis looms.

Government moves to free up housing supply is doing little to help developers who are feeling a credit squeeze leaving them unable to get finance to buy land and build more houses, say mortgage brokers.

The General Manager of Waikato based Omega Capital, a commercial broker specialising in sourcing property finance, Noni Martin says Omega is experiencing four times the number of finance enquiries than they usually receive this time last year.

“It’s no secret there is a real credit squeeze at the moment and while the Government has introduced policy to stimulate house builds on one hand, they’ve tied developers’ hands by creating an environment that has led to a vast majority of developers struggling to get the finance to get started. 

“There’s a housing crisis in New Zealand.  We need more houses built, but it won’t happen fast enough unless the Government looks at the entire development process from freeing up land, to finance for construction to material costs.

“No one is addressing this issue.  As a result New Zealand is going to experience even worse housing supply issues, especially as after Covid we will have population growth,” says Noni.

Omega Capital has received interest from some of the country’s most established property developers who have good relationships with their banks but are struggling to get finance when they need it, says Noni.

“Trusted developers with longevity and strong track records in the industry can’t get the certainty they need from their banks.  That’s where non-bank operators in the market, like Omega Capital, are filling the gap that’s been created,” says Noni.

Changes to lending rules bought in by the Reserve Bank were also making it more expensive for banks to lend to developers.

“Government has moved one lever to free up development opportunity with adjustments like Auckland’s Unitary Plan and provisions that allow homes of three storeys on most sites, without any need for resource consent. 

“But the Government has also put on the brakes by tightening credit rules.  If you take a step back and look at the wider issues, it just doesn’t make sense and it’s getting worse at an alarming rate,” Noni says.

Omega Capital is one of the longest-standing companies in the commercial mortgage broking industry. The business has nearly doubled over the last 12 months, as access to finance for property developers has tightened following changes to lending rules at the retail banks.

Noni, who comes from a background in commercial banking, says in the current environment banks were asking to see complete presales in developments for builders to obtain preapprovals on their finance, but they were struggling to get presales because home buyers couldn’t get preapprovals either.

“It’s comparable to the Global Financial Crisis. Preapprovals are almost non-existent and then house buyers are deciding to hold off purchasing off plans because they are worried about getting let down because developers can’t get finance.  We’re constantly seeing this domino effect,” says Noni.

She says Omega is unique in the industry as it has funds available through its related company, Alpha First Securities. Her team have in-depth experience structuring finance to suit developers’ needs but the issue of tightening credit was something that needed to be addressed or it threatened to further fuel the housing shortage.

Martin was a partner in BNZ’s Property Finance division, managing a $650 million-plus portfolio encompassing several prolific development groups, before she joined Omega in June 2020.

Omega Capital Corporation facilitates property loans between $400,000 and $20 million and assists many borrowers unable to secure bank loans.  The company sources funds from trading banks and finance companies and offshore funders and has a private lending facility backing debt or equity-fund projects.