New Zealand's development finance market in mid-2026 has capital available but deal flow remains slow. Geopolitical tension, rising build costs and rate uncertainty are weighing on confidence. Only projects with credible sponsors, sound structures and realistic exits are attracting funding. For mortgage advisers working with developer clients, knowing which lender suits which deal matters more than ever.
New Zealand's development finance market in mid-2026 has capital available but deals are moving slowly. Offshore money, specialist non-bank lenders and private funding have all entered the space, yet geopolitical tension has knocked confidence at a delicate point in the cycle. Casey Williams, general manager of Killarney Capital, captures the mood precisely: 'For the last few months, the market has felt a bit like everyone is standing near the dance floor waiting for someone else to make the first move.' Robin Hopkins, general manager for property development and business lending at Avanti Finance, agrees: 'Overall, the market remains subdued. We were starting to see green shoots coming through prior to the recent geopolitical tension in the Middle East, which has unfortunately dampened confidence once again.' Developers hold sites and need funding, but only the strongest deals are progressing.
The projects attracting development finance in 2026 tend to be smaller, simpler and lower risk. Phil Bennett, head of lending at First Mortgage Trust (FMT), describes 2026 as a transition year with 'early recovery, but … uneven confidence', noting building consents are up 11% year-on-year as proof the pipeline is real. Bennett favours 'smaller, simpler and staged risk' structures, particularly low- to medium-density residential terraces, turnkey and stand-alone product. Larger transactions are also emerging. Hopkins finds it 'encouraging to see more jumbo deals coming to the market – slightly larger developments, typically ranging between 20 to 50 houses in prime locations.' For mortgage advisers, the lesson is clear: well-structured deals with experienced sponsors at an appropriate scale are moving, while speculative or oversized projects remain difficult to place.
Pre-sales are no longer a universal requirement across development finance in New Zealand. Williams explains the shift: 'Funders are increasingly comfortable relying on residual loan-to-value ratios and the availability of refinance or residual stock funding once the project is complete. Pre-sales still matter, but more as evidence of demand and value than as a blunt requirement.' Hopkins identifies a structural driver behind the change: 'It's become increasingly difficult for purchasers to secure bank funding for homes that are yet to be built.' That difficulty has created a real opportunity in turnkey funding, where lenders back builders whose buyers have already secured bank approval before construction starts. Advisers working with developer clients should understand whether a lender applies pre-sale thresholds as policy or uses them as one indicator among several.
Build costs peaked at roughly 10.4% annual growth in late 2022 before easing sharply through 2023 and into 2024, reaching just 0.6% by mid-2024. The March 2026 quarter recorded 3% annual growth, the highest in two years. That is enough to disrupt feasibility models built on the assumption cost pressure had fully eased. Bennett sees the effect directly in how FMT structures deals: 'We're kind of seeing more buffers being built into projects around interest rate increases. Certainly, there's a bit more around construction slippage, and then anything that's burning diesel these days needs to have a bit more buffer in it.' Advisers preparing feasibility submissions for lenders should ensure contingency allowances reflect current cost conditions rather than the lower figures that prevailed in 2024.
Banks remain active in development finance but have grown more selective. Williams is clear about where banks perform well: 'Banks will always play an important role in development finance. They have scale, balance sheet strength, brand recognition and the ability to price very competitively when a deal fits neatly inside policy.' Complex deals often sit outside standard bank policy, however. Bennett frames the non-bank advantage in practical terms as 'flexibility, speed and also judgement-based credit decisions'. Williams adds that time is one of the most expensive ingredients in any development: 'A cheaper interest rate is helpful, but not if a project loses two months waiting for an answer.' For sponsors with layered structures, non-standard security or tight construction programmes, engaging a non-bank lender from the outset can preserve both time and margin.
Regional performance varies considerably across New Zealand. Bennett describes Christchurch as 'going really strongly', driven by population growth, job opportunities and available land. Queenstown has moved away from dramatic boom-and-bust cycles into what Bennett calls a 'rolling hills scenario', with satellite markets including Cromwell and Central Otago absorbing overflow demand from there. Hopkins works with a developer-builder client in Cromwell who 'continues to experience strong growth in this market'. Auckland remains what Bennett calls 'the centre of the universe', with ripple effects flowing outward from any major shift there. The Hutt Valley is also changing, shifting from an oversupply of terraced houses towards more stand-alone product. Mortgage advisers with regional developer clients should track these sub-market differences, as lender appetite and pricing can vary materially by location.
Consenting delays add measurable cost to projects and alter the risk profile lenders see. Williams is direct: 'For developers, time means holding costs, consultant costs, changing construction prices, staff and contractor uncertainty, pre-sale risk and equity tied up for longer. For funders, time changes the risk profile.' Hopkins points to inconsistency across local authorities: 'There's a lack of consistency amongst the local authorities in terms of time to decision, cost of consents and process.' Bennett acknowledges government intent is positive but says the gap between policy and practice remains real: 'It's still reasonably lengthy and costly around that consenting process.' Faster consenting, he says, would feed directly into housing affordability. Advisers should factor consent programme risk into any development finance submission and discuss contingency funding with lenders where delays are likely.