Burgeoning non-bank lending sector means tightening RBNZ restrictions and reducing appetite of banks to lend on property needn’t derail NZ’s development pipeline
Investors and developers left feeling frustrated by the current squeeze on bank lending need not despair thanks to the rapid expansion of the non-bank lending sector here in New Zealand.
JLL NZ Head of Debt Advisory, Mark Farrands says that many will have already seen their traditional borrowing avenues closed off as regulations instructing banks to hold more capital reduce first tier lenders’ appetite to commit. And with rising costs and interest rates placing further pressure on project feasibilities, he expects bank lending to remain constrained for some time.
“Under the prevailing economic conditions, the major banks will continue to take a risk-off approach to lending. This will see them reserve capital only for their top tier customers, leaving a significant funding gap for projects earmarked for development,” says Farrands.
“However, seeing the banks take a lower share of the property finance market has encouraged a growing number of alternative lenders to come forward and bridge the funding gap, and we’re aware of a lot of local and offshore funds now operating in New Zealand who will lend on property.”
Farrands says this is by no means a new phenomenon, and a growing non-bank lending sector will bring New Zealand into line with global finance markets. But with the lending landscape now comprising a broader range of risk profiles and debt servicing requirements, borrowers should seek specialist advice to ensure they find a partner suited to their circumstance.
“Many lenders will specialise in certain locations or asset types - and pricing will range widely, depending on equity levels, how de-risked the asset or project is, and the risk appetite of investors.”
“With non-bank lending there is no one size fits all approach, and we’re excited by the opportunity to connect borrowers with lenders to create mutually beneficial development partnerships.”
JLL (NYSE: JLL) is a leading professional services firm that specialises in real estate and investment management. JLL’s Debt Advisory arm is the largest Debt Advisory business in the world. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.6 billion, operations in over 80 countries and a global workforce of more than 91,000 as of 31 December 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.
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