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Articles by Kris Pedersen.

Are you locked out of the property finance market?

AUTHOR: Kris Pedersen
Managing Director at Kris Pedersen Mortgages

POSTED: 14 May 2019

Over the last few years it has become harder for property investors and developers to obtain the funding they need. In spite of low interest rates, some good opportunities in the property market and a high demand for new housing (especially in Auckland), it has become more and more difficult to get funding from the main banks. So is there a solution?

Non-bank lenders
Non-bank lenders have been on the scene for a long time, but since the Global Financial Crisis of a decade ago they haven’t played as much of a part in the New Zealand mortgage landscape. In fact, according to data collected by the Reserve Bank (RBNZ), this segment reduced from over 5% market share in mid-2008 to being well under the 1% mark by early 2016.

Whilst the growth since then has hardly been earth-shattering, the lending in this part of the market has been increasing. Several factors have caused this:

• The LVR restrictions imposed on banks by the RBNZ.
• Debt servicing requirements being much more onerous than they were only a couple of years ago. This is likely due to pressure on banks, having been told that if they didn’t tighten their lending criteria, a debt-to-income rule may be applied to their lending.
• Issues across the Tasman, such as the damning Royal Commission investigation into their banks and the corresponding tightening of lending criteria in their New Zealand-based subsidiaries.

This is even before we get into potential increased capital requirements that may be imposed on the main banks and which analysts believe would result in a lift in interest rates.

All of this has made it more difficult for investors to obtain finance from the main banks. As a result, what we have seen at Kris Pedersen Mortgages over the last couple of years is more entrants coming into the non-bank space because they identify the opportunity to create solutions that fill this hole. Traditionally, non-bank lenders have been more expensive, but their pricing is now slowly improving to meet customer demand.

Short-term lending solutions for development finance
Solutions have come in specifically to fill part of the development funding area, which banks had restricted. There are now numerous asset lenders in place to cover short-term bridging finance and funding for property traders who can’t meet the debt servicing required elsewhere.

But what about longer-term finance options?
There have been a couple of ‘prime’ non-bank options in the market for a while now who appear to provide the solutions the market has needed. Unfortunately, in most cases these lenders haven’t delivered on what was promised because of their own restrictive requirements.

However, there is light on the horizon. At KPM we have been working with a lender behind the scenes who we think will solve a lot of these issues and open doors at a reasonable price for those of you who have been locked out of the market.

Come along to the Property Leaders One Day Event on May 26, where I will be discussing why you need to understand this market and I'll reveal the new solutions which are coming.

Request a Meeting

Kris Pedersen
Managing Director at Kris Pedersen Mortgages

[email protected]

© Gilligan Rowe & Associates LP

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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.

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Hi Salesh, I just wanted to send you an email on behalf of GRA to say how fantastic we have found your company to date. As you know, Ben and I joined GRA a couple of months ago and have just found you so amazingly helpful in getting our new property set up correctly and sorted out. We have what I would consider a rather complicated structure as a result and it’s a fantastic feeling to know that we are getting everything done in the best way possible. We have just had approval to put a minor dwelling on the property which will make a massive difference in terms of cash flow and obviously value, something we would never have even thought of without GRA and which we are very excited about. During the buying process we attended a seminar with Matthew and from the outset thought he was fab. We therein signed up for property school and found this nothing short of fantastic. The content was relevant, up to date and comprehensive, but more importantly it was taught in a way that we could actually understand and really get value out of. I wanted to mention also, that everybody GRA have recommended to us has been just so efficient and absolute masters at what they do. A wonderful network of people that we feel very lucky to now be able to call on. From Kris Pederson and Bryan Rist who put our mortgage together to the insurance guys they then referred us to, I’m super impressed. Within GRA, Ellery has probably turned things around for us faster than I’ve ever known before, something which we appreciated so very much when it came to crunch time. She’s always a pleasure to deal with and again, we’re stoked. We’ve just settled on the property today and are about to go and get the keys. I’m pretty pumped and hence this email is probably rather excitable. So, a massive thank you to you Salesh, the partners for such a fabulous 6 weeks at property school and everyone at GRA for their help. May this be the start of our property empire. Thanks again, - A & B - July 2015

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