The property development landscape is constantly evolving, and in today’s climate, developers are facing a unique set of challenges that are reshaping the way projects are planned, financed, and executed. From regulatory hurdles to surplus residual stock, understanding these obstacles is crucial for navigating the industry successfully.
After speaking with our clients, we thought we’d provide an update on some of the key challenges developers are currently facing.
Pricing and Affordability
- It’s no myth that perhaps the biggest influence on property prices is interest rates. Rising interest rates have increased loan servicing costs for both owner-occupiers and investors. With higher borrowing costs, purchasers can afford to borrow less, which directly impacts property prices.
- Buyer profiles are shifting. A purchaser who might have considered a $1M property a year ago may now be limited to an $800K budget due to current interest rates.
- This makes the price point of your product one of the most important considerations for today’s buyers. Developers must understand their target market, what’s important to them, and how to deliver value while keeping prices attractive.
- Not all news is bad—all major banks are forecasting further OCR cuts, which should lead to lower mortgage rates and servicing costs.
- Selling remains tough, but a common theme among our clients is that well-designed, well-built, and appropriately priced developments continue to sell—though agents are having to work harder. In contrast, projects with poor design and substandard quality are struggling to attract buyers.
Surplus Stock and Increased Competition
- The past few years of booming development pipelines have led to an oversupply of certain types of stock, making it harder to stand out in the market.
- This increase in stock, give buyers more choice, and comparing one project to another project has never been easier. Developers with generic or poorly positioned projects are facing greater challenges in sell-downs, while those who differentiate their product—through quality, pricing, or design—are still transacting successfully.
- As a property developer, you must have a competitive mind set. You are competing against other property developers to deliver the best product to market.
Increased Regulatory and Compliance Burdens
Navigating the regulatory environment has become more complex, with councils imposing stricter requirements on developers. Resource consents, zoning changes, and infrastructure contributions have added significant costs and delays to projects.
- Higher Infrastructure Costs – Developers are being asked to contribute more towards infrastructure upgrades, increasing costs at both the local council level and through large utility providers.
- The Utilities Monopoly Problem – Large utility providers, operating without effective competition, continue to issue excessive invoices—only to reduce them when challenged. We’ve seen numerous cases where a utility provider has dramatically overquoted costs, only for a developer to find a much cheaper solution when proactively exploring alternatives.
- Due Diligence is Key – The Auckland Watercare red zone debacle is a prime example of council failures impacting developments. Large-scale infrastructure limitations were imposed with little warning, catching developers off guard. The takeaway? Due diligence is everything. Leave no stone unturned in ensuring your site is developable.
- Consenting Delays Continue to Worsen – Despite improvements in other parts of the development cycle (labour, materials, funding availability), council approval times continue to get worse.
- Consent processing times remain insanely long.
- COA, EACC, s224c, and title processing now take up to a month each, adding up to four months of delays.
- Active engagement with council is critical – developers must push the process along.
The Good News
While these challenges persist, there are plenty of opportunities for well-prepared developers who can adapt to the changing landscape.
- Stability and Predictability in Pricing – The era of sharp price declines appears to be over. Developers who price their product well and focus on quality are still seeing solid demand.
- Lending Conditions Have Loosened – There’s good availability of development funding, with lenders actively looking to allocate capital. This means:
- Better rates
- More flexible terms
- Higher leverage
- In short, lenders may be willing to lend you more for cheaper.
- It’s a Good Time to Build – With many pipelines slowing down, there’s now surplus capacity in the construction sector. This benefits developers in two key ways:
- Competitive pricing – With fewer projects in the pipeline, developers have stronger negotiating power.
- Improved project efficiency – Managing sub-trades is easier, and developers are seeing better program delivery. Contractors are now completing projects on time or even early—a stark contrast to a few years ago when liquidated damages were the industry norm.
Final Thoughts
Property development is never without its challenges, but developers who are strategic, adaptable, and proactive will continue to find success.
At ASAP Finance, we understand the evolving landscape and provide flexible funding solutions that help developers secure opportunities, navigate market challenges, and keep their projects moving forward.
📞 Contact us today to discuss how we can support your next development – 0800 272 756.