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Property editor of the NZ Herald

Bank loan crackdown sparks housing issues: developer

Banks have cracked down on property development lending precisely at the time new housing supply is needed, one Auckland borrower has complained.

David Whitburn, a former lawyer now developing many residential properties across Auckland and who is also the immediate past president of the Auckland Property Investors Association, said the lending crackdown occurred around July and was making developing places difficult.

Instead of lending up to 80 per cent on some projects which met their criteria, lending now more 70 per cent of the value, he said.

"The banks have really tightened lending. It's making it harder to fund projects," he complained, telling how that was spelling trouble for extra housing supply which the city desperately needed.

Whitburn's largest deal is a $25 million project to build 36 terraced houses in Metcalfe Rd, Ranui. He is also building 10 new places in Papatoetoe in a $5.6m transaction and 11 new places in south Papatoetoe in a $6.8m deal.

In July, the Reserve Bank announced plans to introduce new bank conditions from September 1, requiring most loans to residential property investors to have a minimum 40 per cent deposit. Many banks acted on that in July. That has been cited this month as having an effect on auctions.

Asked to respond to Whitburn's concerns, one major bank denied any change. An ASB spokesperson said on Friday that a check with that bank's commercial team found nothing was any different.

"ASB has not stopped lending to new property developer clients. Each case and situation continues to be evaluated on its merits," the spokesperson said.

Phil Bennett, BNZ head of property finance, said the bank had not stopped lending on new projects.

"We continue to support high quality developments with an emphasis on working with our current customers. Like all banks, we constantly review our approval standards to reflect current market conditions. We rigorously assess all projects to identify the quality of the building and its location, the level of pre-sales and the experience of the team behind it before committing to fund a development," Bennett said.

David Hisco, ANZ chief executive, said getting a home loan might get more difficult and more expensive next year unless banks were able to raise more money from the local market.

The issue facing banks was the volume and cost of international funding they needed to meet local lending requirements, Hisco said. Deposits from local savers were failing to keep pace with the amount of mortgage lending banks need to do as the cost of buying a house surges, he said.

One funding expert said the lending crackdown was due to global constraints and regulations requiring banks to meet international capital adequacy ratios. Funding was becoming more difficult and rates would rise, not due to the OCR but because of capital constraints, he said.

Property Council chief executive Connal Townsend said in September that it was ironic the banks were tightening just when the city was "celebrating" the looser planning rules in the new Unitary Plan designed to allow an extra 400,000 homes.

Whitburn said last week that up to 75 per cent of Auckland residential properties going under the hammer were failing to sell.

In July, ANZ said it intended to honour all existing pre-approvals but would now apply a maximum loan to value ratio of 85 per cent for all owner-occupied home lending across the country and a maximum loan to value ratio of 60 per cent for investors across the country.

ASB said in July it would no longer provide new approvals for lending with a loan to value ratio greater than 60 per cent that is solely secured by non-owner-occupied residential properties.

Last week, the Herald reported how new clamp-downs on residential property investors appeared to be working. Figures from the Reserve Bank showed the amount investors borrowed to buy property dropped $287m between September and October to hit $1.453b, the lowest since January.

The Reserve Bank has been concerned about financial stability due to the amount borrowed by property investors which has been rising rapidly.

- NZ Herald

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