Funding comes as construction prices drop amid future housing supply boost
Vincent Capital, an Auckland-based property finance company specialising in funding for builders and developers, has announced the establishment of a senior warehouse funding facility with Goldman Sachs.
This facility provides for up to $300 million for residential construction lending, underscoring the appeal of New Zealand's property market on the global stage.
The funding comes after construction prices in New Zealand has dropped for the first time in 12 years as the government hopes to also increase the housing supply by increasing density and relaxing urban boundaries.
Facility back by ‘global leader in finance’
Since its inception in 2017, Vincent Capital has lent over $2 billion, with the company supporting the construction of new homes, terraces, apartments, and subdivisions largely in Auckland, Christchurch and Waikato.
The company said the facility was a significant milestone in its ongoing commitment to providing property developers and builders with the financial resources necessary to meet the country's growing housing needs and supporting the sector to continue to build through challenging market conditions as seen currently.
Eoin O’Grady, CFO at Vincent Capital said the company was “incredibly excited” to have Goldman Sachs involved, a “global leader in finance”.
“This facility will significantly bolster our ability to finance development projects throughout New Zealand,” O’Grady said.
“We remain dedicated to fostering a thriving property development sector and are confident that this move will benefit our clients and the wider community."
The facility comes at a time where other NZ property lenders are seeking financing for their facilities in residential and commercial real estate.
Construction prices drop amid increase of housing supply
In a first since 2012, New Zealand has seen a drop in construction prices, with the Cordell Construction Cost Index reporting a 1.1% decrease in the last quarter.
This reduction is a welcome development for the property sector, which has been grappling with high costs amidst a broader economic slowdown.
While O’Grady said it was too early to say, the decline in construction costs may alleviate some financial pressure on developers.
“Lower construction costs, coupled with government initiatives to increase housing supply, could create a more balanced property market.”
In terms of the government initiatives, O’Grady said the New Zealand Government's recent policy to increase housing supply was a “commendable and necessary intervention”.
“By changing planning rules to mandate councils to plan for 30 years of housing growth, the government aims to alleviate the long-standing housing crisis,” O’Grady said.
“The initiative to remove council powers over urban boundaries and development standards is particularly significant. These reforms are expected to streamline the development process, making it easier to build new homes and address the acute shortage.”
Risks remain in construction
While the government’s latest policy holds promise, O’Grady said it must be implemented thoughtfully to avoid unintended consequences.
“Rapid expansion without adequate infrastructure and community services could lead to problems in urban areas,” he said.
“Additionally, ensuring that new developments are sustainable and well-integrated into existing communities will be crucial.”
O’Grady also said the sustainability of the latest price drop in construction prices is uncertain.
“Factors such as global supply chain stability and local economic conditions will play a crucial role in determining whether this trend continues,” O’Grady said.
“Developers should remain cautiously optimistic, leveraging this opportunity to push for more efficient and cost-effective construction practices.”
Ultimately, the recent drop in construction prices was a positive sign for New Zealand's property sector, according to O’Grady, offering a potential boost to housing affordability and development.
“Continued vigilance around costs and strategic planning will be essential to maximise the benefits into your next development.”
