HNZ bond sale to fund government housing strategy

Housing New Zealand will issue bonds in its own right for the first time in over twenty years

By Ksenia Stepanova

30 May 2018

Housing New Zealand (HNZ) is set to sell up to $1 billion in bonds this week, the first stage in plans to borrow up to $2.9 billion to finance the Government’s public housing strategy.

ANZ and Westpac are coordinating the sale which aims to raise $1 billion by the end of June, with the first sales to commence this week. The debt is likely to be taken up by institutional investors due to New Zealand’s shortage of domestic issuers ‘at the high-quality end of the credit spectrum’, according to Bank of New Zealand interest rate strategist Nick Smyth.

“Housing is a policy priority for the Labour Government,” says Smyth. “To that end, the Government has announced its intention to increase the stock of state houses by 6,400 over the next four years. HNZ also intends to renew around 75% of its existing stock of state houses over the next twenty years. Given the relative scarcity of high-quality domestic issuers in New Zealand, we expect demand [for HNZ bonds] to be strong.”

Budget 2018 has allocated funding for a package of 6,400 public houses, which will include HNZ’s $2.9 billion borrowed from third parties along with a further $900 million from HNZ’s operations. The Government has also increased HNZ’s limit on borrowing protocol to $3.05 billion, and the corporation will issue bonds in its own right for the first time in approximately twenty years.

HNZ is a Crown agent that provides housing services to people in need, and currently owns and manages approximately 63,000 properties nationwide. It also offers a number of affordable housing products including the KiwiSaver HomeStart grant, the Welcome Home Loan and Tenant Home Ownership, which aim to create a pathway into home ownership.