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Land
Bare land doesn’t earn rent and can take years to consent. Lenders know that, so land is one of the hardest things to finance well.
By Yatin Kainth, Financial Adviser FSP1007497. Last reviewed
Short answer
Land banking loans in NZ fund the purchase or holding of land while it’s rezoned, consented or waiting for the right market. Most come from non-bank and private lenders, at 50 to 65% of land value, with terms of 6 to 24 months and interest often capitalised. The real cost is the holding cost, so plan the exit before you buy.
Loan
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Interest over the term
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Total holding cost
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Value increase needed to break even
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Interest is capitalised monthly, as is common on land loans. Indicative only.
Consents take longer than expected, councils change plans, and infrastructure costs (roads, water, power) can be large. Build in time and cost buffers, and check whether the land is affected by natural hazards or overlays. The Resource Management Act reforms under way in NZ may also change how and when land can be developed.
Banks lend on residential sections with services in place. Larger or unconsented land is usually funded by non-bank lenders.
Usually 35 to 50% of the value.
Often, yes. It helps cash flow but increases the debt, so the exit has to cover it.
Typical terms are 6 to 24 months, sometimes extendable. Longer holds usually mean refinancing.
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