In 2022 we saw record-breaking growth in residential construction costs. However, CoreLogic’s latest data shows this growth may be easing. In the last quarter of 2022 construction costs increased by only 1.7%, compared with a 3.4% increase in the previous quarter. We anticipate this trend will continue as economic uncertainty continues through 2023.
Whilst we have pulled back on most new construction lending at present, our remaining construction loans continue to be closely monitored with regular communication and site visits to ensure they stay on track.
Economists are predicting that 2023 is going to be a tough year, but it’s nothing we haven’t seen before. We have been operating for more than 25 years and in that time, we have seen many economic changes, including the 2008 global financial crisis.
At SCP we focus on quality over quantity with our loans. You may see there are fewer available loans coming into the first part of 2023 as we select on the very best loans that we know our investors want to invest in. However, we do anticipate stock levels steadily increasing as we slide into the end of this financial year.
We expect to see an increase in borrowers applying for equity releases in 2023. In addition, some longer-term loans (2-3 years) may be on offer to allow borrowers to ride out any period of financial uncertainty.
These loans could be to assist with business payments or increase business capital to expand operations. You may also see property investors releasing equity against an existing investment property to prop up their property portfolio.
We are also turning our attention to opportunities for lending in other regions in New Zealand as many areas experience lower market corrections than the major cities. Our focus regionally is on standard residential properties, at good LVR’s typically to a maximum of 60%.
Whilst you may see different types of loans, longer terms, and expanded locations on the portal this year, the ethos behind our business has not changed. We remain conservative lenders completing thorough due diligence on every application we approve. We will continue to lend our own money first, before putting loans on the portal for investors, so we put our money where our mouth is.
To understand more about our investment strategy and what that means for your potential returns, feel free to give our friendly investment team a call. They’re always here to answer any questions you may have.