There used to be a whole sector of second tier lenders who took on that risk. We used to call them finance companies. They had an appetite for the kind of investment risk that banks won't take. As I'm sure we can all agree they were a fantastic bunch of community spirited organisations.
Okay, seriously, this isn't a love letter to the finance companies. I don't think my email inbox could quite handle the response.
But it is a great shame that there weren't more responsible people at the controls of the finance companies and that there wasn't a better regulatory system in place to monitor them. That's not just because the resulting collapse of the sector cost so many investors so much - although that is the greater of the shames - it is also because they did, in theory, perform a valuable function in the economy.
Unfortunately in the real world people got greedy, there was - as the courts have found - criminal behaviour. Even where laws weren't broken there was a culture that failed to adequately disclose the risk to the investing public. There was a financial advice culture which drew in investors who shouldn't have been there in the first place.
It was a national disaster.
So no one will weep for the finance companies but it does leave us with a difficult dilemma as we look at how we would like to see our cities developed over the next decade.
Who would fund the likes of Auckland's David Henderson who built the impressive Hilton/Cruise Ship terminal building on Auckland's waterfront - or the next generation of Hendersons? Yes, Henderson is now bankrupt - a reminder of just how risky the development business is.
Often these property developers are larger than life and inevitably they have a high appetite for risk. But without those risk takers many of the grand projects in the grand cities of the world would not get built.
One obvious place for raising capital and for trading the risk and rewards involved in the property sector is the sharemarket.
Those with a long memory will recall that property investment companies were big on the local sharemarket up until October 1987. Anyone remember Chase Corp and Equiticorp?
There is a long tradition in this country of drawing the public into property and related finance investments with horrendous results for those who get caught when the cycle inevitably turns.
As a nation we are certainly learning about this the hard way. There are more than a few investors out there who lost big on the stock market in 1987 and then having lost their trust in equities turned to the high interest of debentures, only to lose big again.
The last thing we need as we head into another upswing of the property cycle is some new and innovative way for New Zealanders to lose their money on property investments.
There are some long-standing and successful property trusts listed on the NZX but by and large the stock exchange and the broking community became very cautious about second tier financiers and property development after the 1987 crash.
That's one of the reasons that the private finance company sector grew so strongly through the 1990s and 2000s. With the benefit of hindsight, casting them out into the unregulated wilderness was not the best solution to the problem.
The NZX is now a far better regulated and more sophisticated institution than it once was. If the second tier lenders are to rise again then we need that to happen in a highly controlled environment.
As councils and the Government look to encourage the right kind of development for our cities they should look to work with the NZX and the property sector.
It may offer a path for New Zealanders to take some ownership and control of the process.
We need there to be high standards of disclosure around the risk involved for investors. We need public meetings where shareholders can stand up in front of the media and query moves to invest in Fijian holiday resorts or the nature of related party lending and all those other things that went on behind closed doors.
It is no secret that we need New Zealanders to look beyond property as the investment class of choice if we want a more productive economy.
But it is also true that property is an investment class that generates great returns as long as the risk is properly managed.
And if the money is invested well it can also produce great properties - safe, elegant buildings that we want to work and live in, buildings that make us proud of our cities.
That is the goal. It seems we are at a crucial point in the cycle with regard to both Christchurch and Auckland. We need to get all the processes around property development right before we embark on building this bold new future.
The way we fund these things is not as visible as the way we zone them or the kind of architecture we choose but is a fundamental building block. At the heart of it all - as it always is - is the money.
