The New Zealand residential construction markets received a boost with a new government-backed underwrite program designed to stabilize the industry amidst rising interest rates and low building consent rates.
This initiative, announced by Housing Minister Chris Bishop and Building and Construction Minister Chris Penk, aims to provide financial confidence to developers and help maintain housing supply.
Stabilizing the Construction Market
This ensures that housing construction can continue, even in an unstable economic environment.
The program will target high-population regions such as:
- Auckland and Wellington, where housing demand remains high.
- Hamilton and Tauranga, rapidly growing cities with increasing housing needs.
This initiative aligns with the government’s broader mission to address the ongoing housing crisis by enabling cities to expand and adapt to population growth.
How the Underwrite Program Works
An underwrite provides financial backing to developers by guaranteeing the purchase of unsold homes in a development project if the developer is unable to achieve pre-sales.
These pre-sales are often necessary for developers to secure funding from banks, particularly in large developments like apartment complexes. With high interest rates making pre-sales more difficult, the RDU fills this gap, allowing developers to move forward with their projects.
For a project to qualify for the underwrite, the development must include a minimum of 30 homes.
Developers must have a proven track record of successful housing projects, ownership or legal access to the land, and the required building consents. Additionally, they must provide:
- A recent market valuation and evidence showing the need for financial support.
- Proof of marketing efforts and available workforce to complete the development within 6-12 months.
Positive Impact on Housing Supply
The new underwrite program is expected to significantly impact housing availability in Australia and New Zealand, particularly in regions facing population pressures.
By improving developer access to finance, the government ensures that construction can continue, providing ready-to-purchase homes as the housing market recovers.
As interest rates eventually decline, these projects will provide essential housing for prospective buyers, helping alleviate the housing shortage.
With the launch of this initiative, the government also closed applications for two previous programs—Kiwibuild and the BuildReady Development Pathway—redirecting unused funds to the new RDU.
A Long-Term Solution for the Housing Crisis
Minister Bishop and Minister Penk emphasized that the underwrite program is just one piece of the government’s broader strategy to address the housing crisis.
This plan includes the “Going for Housing Growth” policy, which promotes urban expansion by allowing cities to build both upward and outward. Additionally, sensible changes to the Residential Tenancies Act are underway, designed to protect renters while encouraging a stable rental market.
Closing the Loop
The government’s new underwrite initiative will boost the construction sector, protecting the housing supply and allowing developers to build with confidence, even in uncertain economic conditions.
With the program set to begin accepting applications, the future looks promising for Australia and New Zealand’s housing markets.
Sources: THX News, Housing NZ & Building and Construction NZ.
