Quote Originally Posted by JBmurc View Post
But in many cases, the loans are fully backed by high incomes and good equity .. personal risk wise rather have a 10% yield x 10yr fixed term lease than a week on week 5% Residental rental with exposure to a tenant that may or may not trash your property ..
No the banks were very clear (and this is not with just BNZ in Christchurch). They said it's very unlikely to get a loan approval by their peer lending panel for loans on commercial ventures on residential land development. I saw vasts amounts of land in the north area of Chch (Burwood etc) where projects have went to a complete halt because of lack of funding. On top of that, there have been fraudulent cases where the banks have lent funds to similar projects up in Auckland that the owners (some that were non-resident of NZ) have taken the funds and disappeared. It doesn't take many of these large projects to fail where the banks decide that it's too risky to keep lending. They know the house market has turned into a buyer's market and with the foreign buyer's ban in NZ, it would be hard convincing that there's enough domestic $ to keep the prices high while development of residential land fizzles away.

So in a market like today, "fully backed by high incomes and good equity" is a not the case. When unemployment rises, so too do the incomes and when the banks start seeing more defaults, that means no more $ will be loaned out.