We are seeing new structures and different property offerings. Now Government, Council, community organisations, iwi are all active in this space. The focus is mostly affordable housing – ironically being delivered via complex contract structures with multiple parties involved, probably adding cost to the development process. But the land is going into and out of the development in different ways, the return requirements more long term. The players are more sophisticated and experienced in contracting and in development generally, although not always with a residential background so this gap is critical to cover.
Residential house-building companies are doing some of that. But do they have the resources and the working capital to cover the gap sufficiently?
Funding is different. The banks have gone back to full due diligence before providing finance and will ensure i’s are dotted and t’s crossed. The second tier is small so-far.
We are seeing massive foreign investment, mostly Chinese, in residential property development, most usually in passive form. Local development teams run the jobs with equity provided offshore. There is talk of sourcing labour and materials from China to lower costs. Overseas Investment Act criteria may need to be considered. Gaining residency is not the focus, instead it’s financial return.
Added to that, the planners in Auckland need to navigate the proposed Auckland Unitary Plan and Auckland Housing Accord.
Some things are not new but remain largely untested – the 2010 unit titles legislation; a lot of the consumer protection legislation introduced at the end of the last development cycle. Warranties under the Building Act 2004, duties of care under the unit titles legislation and increasing duties on real estate agents all make developer’s liability an important consideration; especially as most of the current developers have much more of a long term feel to them. So expertise, innovation and care required here.
So there is a lot that is different out there. But the underlying product remains residential property. The team needs to have the expertise to deal with the complexities yet make it as simple as possible for the ultimate owners, especially for properties being delivered at the affordable end of the market.