Under construction. Photo Louise Thomas.
Counter to the theory that developers and financiers simply respond to market wide forces of supply and demand, new research from Building Better Homes, Towns and Cities researcher Dr Larry Murphy of the University of Auckland says that developers and financiers actively create and operationalise practices that govern acceptable profit margins, operational structures, and house prices. In addition, access to finance and the conditions under which finance is offered have profound impacts on residential development practices and processes.
Dr Murphy presents the findings from a series of interviews with senior developer, valuation, and finance professionals working in the residential development sector. Complex interactions, interests, and relationships exist between financiers and developers, and these interactions are embedded in residential development feasibility analysis.
“The findings from the interviews suggest a number of interesting observations on the financier-developer relationship and the impact this can actually have on housing supply. For example, developers need to be seen to achieve a certain level of profitability in their feasibility analyses if they want to secure funding. This conditions what are viewed as acceptable price forecasts and residual land valuations.”
Compared to the significant attention given to the role of public planning and its possible impacts on housing supply and costs, the finance-developer relationship has been given little attention. These interviews are part of a broader research component in the Architecture of Decision-Making stream of Building Better Homes, Towns and Cities designed to fill that gap.
Contact: Dr Larry Murphy, firstname.lastname@example.org.