25 Jan 2019

KiwiBuild: 'The fundamentals are sound' - developer

From Morning Report, 8:16 am on 25 January 2019

Fewer than 300 of a promised 1000 KiwiBuild homes are on-track to be built. The Housing Minister admitted this week that the government won't meet its first-year target of 1000 homes.

The Ministry of Housing and Urban Development has now confirmed just 293 houses are on track to be built in KiwiBuild's first year. Forty-seven houses have been built in the first six months of the programme.

Housing Minister Phil Twyford pins the slow progress on lack of interest from developers - who say the programme doesn't offer much financial incentive.

But the director of NZ Living, which is building dozens of KiwiBuild properties in Auckland, Shane Brealey, disagrees. He says overseas investors will start circling if local companies don't pick up the contracts.

"In my experience and view, the fundamentals are sound," he tells Susie Ferguson.

"The government's providing an underwrite to incentivise more lower-cost housing to be built. This generates efficiencies enabling lower prices to be achieved, and the Crown is protected by paying valuation or less for anything that happens to be not onsold by the time the development is completed."

He says when the market gets quiet, developers will sit on their land, with projects becoming fewer and smaller, until demand catches up.

"I think some of the technical aspects of the programme need a few adjustments. I think typical cagey old developers - they like to sit back and watch, see how things are going to pan out. It's early days... To me it's an absolute no-brainer. It's low-risk." He says it is a tough game and it's important to know how to deliver good quality efficiently.

"I think if the Australian government were to put a policy like this out, it would have the Australian development community all over it.

"It's probably a reflection of our boom and bust construction and development cycle. Our sector here just needs to maybe adjust to this opportunity, understand the opportunity, and get in behind it."