tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Thursday, June 30th, 6:10PM

News

rss
Latest Headlines

Furore over land banking exaggerated

Land banking is the latest scapegoat in the ongoing blame game over Auckland’s housing issues, but investor advocates are querying how prevalent the practice really is.

Wednesday, August 31st 2016, 11:00AM 1 Comment

by Miriam Bell

First, foreign buyers were to blame for Auckland’s sky high prices and housing supply shortage. Then it was the fault of domestic investors said to be speculating and on-selling properties wildly.

Now, land banking – where a land owner holds a block of land without developing it while it accrues value - is being highlighted as the reason for Auckland’s housing market woes.

The issue has gained prominence in the wake of the Auckland Council’s adoption of the Unitary Plan, which has a focus on increasing the city’s supply capacity.

It seems, at least partially, driven by the fact that sizeable amounts of land in the Government’s much vaunted Special Housing Areas (SHAs) do not feature any obvious signs of development activity.

It is thought that some developers have opted out of the SHA processes to develop under the Unitary Plan, which doesn’t require 10% of the housing to be affordable, or to simply sit on the land as it accrues further value.

However, property investor experts spoken to by landlords.co.nz are not convinced the practice is as common or widespread as is being claimed.

Auckland Property Investors Association president Andrew Bruce said most investors he knows simply don’t have the money to have big blocks of land sitting round and not producing any returns.

“You would have to be seriously wealthy to afford to do that. Investors tend to be driven by returns in order to maintain and develop their portfolios.”

The pending changes to the Unitary Plan might have led to a bit of speculation on the grounds that land in certain areas might be up-zoned, he said.

“But it would be just a select few who actually have the financial ability and horsepower to sit on large blocks and do nothing with them.”

If land banking happens, it tends to be large-scale developers who sit on land for a bit before redeveloping it, he said.

“This may not even be intentional. It can take a while to get a development under way.”

Positive Real Estate director Campbell Venning agreed. He suspects the idea of large scale land banking is probably more a media assumption than a reality.

“I haven’t seen that much of people or companies sitting on large scale blocks. It would be necessary to have a lot of money to do it because the costs involved in land banking are expensive.”

Most of the developers he knows are keen to get their projects consented and work under way as soon as they can in order to get a decent return on the development, he said.

Accompanying the chorus of complaints about land banking are demands for a land tax, targeted rates or even government intervention to force landowners to develop their land.

NZ Property Investors Federation executive officer Andrew King, who thinks the claims about the scale of land banking are doubtful, said such proposals are not just.

“You have to have property rights. You can’t just force people do what you want with their land. People have the right to do what they want with their land. The alternative is not fair.”

Meanwhile, specialist property accountant Mark Withers said you could argue that anyone land banking would already be taxed.

“If land is acquired for the purposes of capital gain, the landowner will be taxed on any profit they make when the land is sold.”

But, in his view, it would be a brave person who would buy and hold a block of land on the assumption that it would gain in value.

“It is not necessarily economic to land bank and not worry about getting any returns – particularly if you have funded the purchase with debt. There are also opportunity costs and holding costs.”

For this reason, developers usually want to make a profit on an investment in land while investors want to see returns, Wither said.

“Most people would have a practical plan for a block of land they owned, although it may be a long term one.”

 

« Consents dip adds to supply worriesFree Investment Property Showcase Events: Auckland, Wellington and Christchurch »

Special Offers

Comments from our readers

On 1 September 2016 at 9:35 pm bArt said:
If land banking is occurring in areas that one would expect housing development, it is more likely that the red tape, consenting costs and resource consent are the primary deterrents to development, making it appear as though land banking is occurring.

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
  • Controversial and coming soon, but how broad is COFI’s reach?
    “The slow dismantling of the advice industry bought to you by those who missed the straw that broke the camel's back....”
    8 hours ago by Good Hamish
  • Conduct laws finally real
    “He (Clark) said reviews by the Reserve Bank and the FMA had found banks and insurers lacked focus on good customer outcomes,...”
    13 hours ago by Amused
  • OBITUARY: Controversial adviser dies at 80
    “Condolences to family and friends. Good that a lot of the very positive work Roger undertook has been called out....”
    16 hours ago by jeff m
  • OBITUARY: Controversial adviser dies at 80
    “Roger Moses was a true pioneer in the financial planning world. As the say, you can easily spot your pioneers… they have...”
    1 day ago by Managing Partner & Dean
  • Pathfinder big winner
    “Well done Peter. I know, as most others do, you are very passionate about ethical investing. This is a well deserved award...”
    2 days ago by John Milner
Subscribe Now

Mortgage Rates Newsletter

Daily Weekly

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 5.95 4.85 5.35 5.65
ANZ 5.94 5.95 6.40 6.59
ANZ Blueprint to Build - - - -
ANZ Special - 5.35 5.80 5.99
ASB Bank 5.85 5.35 5.80 5.99
Avanti Finance 5.95 - - -
Basecorp Finance 6.95 - - -
Bluestone 5.89 7.49 8.09 8.19
BNZ - Classic - 5.35 5.69 5.99
BNZ - Mortgage One 5.94 - - -
BNZ - Rapid Repay 5.94 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.94 5.95 6.29 6.59
BNZ - TotalMoney 5.94 - - -
CFML Loans 6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Co-operative Bank - First Home Special - 4.75 - -
Co-operative Bank - Owner Occ 5.85 4.85 5.35 5.65
Co-operative Bank - Standard 5.85 5.35 5.85 6.15
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 ▲5.35 ▲5.85 -
Heartland Bank - Online 4.10 ▲4.90 ▲5.29 ▲5.59
Lender Flt 1yr 2yr 3yr
Heretaunga Building Society 6.10 ▲5.35 ▲5.80 -
HSBC Premier 5.89 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.25 4.39 5.09 5.45
Kainga Ora 5.43 4.57 5.58 5.85
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 5.50 ▲6.19 ▲6.69 ▲6.79
Kiwibank - Offset 5.50 - - -
Kiwibank Special 5.00 ▲5.19 ▲5.69 ▲5.89
Liberty 4.84 - - -
Lender Flt 1yr 2yr 3yr
Nelson Building Society 6.45 5.55 6.15 -
Pepper Money 4.49 - - -
Resimac 6.19 5.60 6.16 6.29
SBS Bank 5.79 ▲5.65 ▲6.09 ▲6.19
SBS Bank Special - ▲5.15 ▲5.59 ▲5.69
Select Home Loans 4.09 4.29 4.86 5.09
TSB Bank ▲6.30 ▲5.65 5.79 ▲6.45
TSB Special ▲5.50 ▲4.85 4.99 ▲5.65
Unity 5.65 4.95 5.55 -
Wairarapa Building Society 5.74 4.95 5.75 -
Westpac 5.94 5.95 6.29 6.59
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.94 - - -
Westpac Special - 5.35 5.69 5.99
Median 5.87 5.35 5.77 5.99

Last updated: 30 June 2022 9:19am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
 
Site by Web Developer and eyelovedesign.com