New Government’s focus on alternative housing creates new opportunities
Overseas investment is vital for realising the full potential of alternative housing like Build-to-Rent, says Buddle Findlay property partner, Paula Ormandy.
One of several Buddle Findlay female partners heading its property practice – unusual in that property and construction are generally seen as male-dominated industries – Ormandy has championed alternative housing, such as Build to Rent, shared equity and rent-to-buy.
Much of that advocacy has come while she has been chair of the Property Council’s Residential Development Summit for the past three years and a member of the previous Minister’s housing working group – and Ormandy sees real change on its way for investors and property developers as a result of the coalition Government’s plans to amend the Overseas Investment Act.
That will, she says, make it easier for Build to Rent housing to be developed in New Zealand: “Increasing offshore investment could play a significant role in improving housing supply in New Zealand, something that’s been under greater pressure due to high migration and population growth.
“In particular, overseas investment is the key to unlocking the full potential of the local Build to Rent market at scale. This will be great news for those looking for long-term rental options as well as investors and developers who may have struggled to finance BTR housing in the current market,” she says.
While construction companies have struggled with acute labour and materials shortages since the pandemic, leading to delays and spiralling costs, Ormandy notes that cost escalation appears to be easing. The threat of recession and the new Government’s focus on cancelling projects in the first 100 days have also added to the industry’s uncertainty, but Ormandy sees the Government’s focus on alternative project funding structures (such as PPPs – Public-Private Partnerships) as bringing new opportunity.
Ormandy has almost two decades’ experience in commercial property and construction including major projects, complex leasing, property development, high-value portfolio acquisitions and disposals and advising large global corporates on entry to the New Zealand market.
She is not the only female partner leading the charge in the property sector and with views on how 2024 is shaping up for property and construction, and what a change in government means for the sector.
Wellington property and construction team lead Charlotte von Dadelszen believes faster consenting will also relieve pressure on the building sector. Recognised in NZ Lawyer’s Elite Women list, von Dadelszen has over 25 years’ legal experience and specialises in complex property, leasing and construction projects across both private and public sectors.
She says that while the new Government repealed the Natural and Built Environment Act (NBEA), the fast-track consenting process was retained, with new fast-track legislation expected to be introduced shortly as part of the Government’s first 100 days package.
“There’s hope that the new fast-track regime will speed up approvals for infrastructure projects,” she says, “reducing the headaches currently experienced with delays and their associated costs.
“There’s also optimism that more innovative building methods and products will soon be enabled through reforms. Provided international standards are met, legislation requires that building materials and product systems be approved. This will make it easier for offshore clients to enter the New Zealand market, encouraging competition and spurring growth and innovation that will benefit builders and buyers alike.”
Meanwhile, it’s ESG (Environmental, Social and Governance) values that Christchurch partner Julia Gabrielle sees as the biggest challenge and opportunity for the sector. Gabrielle advises public and private sector clients on complex commercial property transactions, associated development funding, construction contracts and leasing arrangements, with particular expertise in carbon forestry and the NZ Emissions Trading Scheme.
She believes ESG values have become increasingly important to the industry, as demand for sustainability and net zero carbon commitments increases. Developers and clients are more mindful of incorporating ESG principles into their projects in terms of site location, construction materials and principles as well as leasing terms which promote environmentally friendly practices.
Likewise, investors in the syndicated property investment market are increasingly considering ESG values when making investment decisions. Clients are also becoming more aware of the impacts of climate change on costs and overall sustainability. While events like the recent floods and Cyclone Gabrielle may have increased demand for civil contracting work, professional service providers, local authorities and insurers will now be more cautious and considerate of potential civil liability claims.
Gabrielle says this could spark a trend similar to what happened after the Christchurch earthquakes, with a surge in negligence claims against construction professionals, such as engineers, building contractors, and project managers, and moratoriums on new cover for both material damage and contract works being imposed by insurers.
“Ensuring that contractual arrangements are carefully drafted to mitigate against possible future liability is critical, but organisations also face the difficult task of evaluating climate related risks and balancing those against the cost of insurance cover,” she says.
Although a Cabinet decision abolished the Construction Sector Accord’s three-year Transformation Plan late last year, she believes the Accord itself will continue in a different form, bringing industry and the Government together to reduce construction’s high environmental impact.
“Those involved in the industry will be well-served by considering carefully how they can incorporate environmental sustainability into their decision-making and practices. If they don’t, they may find they are left behind in an increasingly climate focused industry.”
Despite a slight easing in the construction boom, Ormandy predicts another strong year for construction in view of near-record population growth. To cater for this, she says it will be key for industry stakeholders to stay informed, adapt to changing conditions, and collaborate to effectively address ongoing skills shortages and sustainability challenges.
“This is an exciting period of change, with real opportunity to take advantage of overseas investment, new funding structures and the ability to innovate with new products. Businesses who are ready to seize these opportunities will be in a really strong position for the next 12 months,” she says.
For more information: buddlefindlay.com.