Navigating the Complexities of Residential Property Development in New Zealand

Richard Vaughan, Regional Director

When the property market cools, developers are often the first to feel the pressure. In 2021, many new entrants – armed with an iPhone and a vision – were able to turn a profit. But in 2025, conditions are far less forgiving.

Residential property development in Aotearoa has always required a long-term view, but today’s market demands rigorous due diligence and strategic foresight. With rising costs, regulatory reform, and infrastructure uncertainty, even seasoned developers need to rethink their risk approach.

Here are 10 of the most common challenges developers face in New Zealand – and key strategies to mitigate them.

1. Access to Reticulated Services

 

Challenge: Infrastructure may appear available, but it’s not always accessible.

“In New Zealand’s biggest city infrastructure may be present at the gate, but sometimes there’s no way to connect to it,” says Opteon’s Regional Director Richard Vaughan. “The classic example was a property I looked at in (Auckland’s) Forrest Hill. It has resource consent, but it doesn’t have access to fresh water of sufficient supply to accommodate infill development.”

Greenfield sites in particular are impacted by the Local Water Done Well programme (formerly Three Waters), which is creating uncertainty around who funds and delivers infrastructure. Constraints across the Watercare Network are well known in Auckland — but cities like Hamilton and Wellington face similar challenges. Whilst we accept Watercare are making steps to clarify these challenges in Auckland, they remain somewhat murky.

Mitigation: Never assume service availability, even for inner-city sites. Confirm access to water, wastewater and stormwater infrastructure with a qualified planning consultant before committing to a purchase.

2. Financial and Lending Hurdles

Challenge: Tight lending conditions are holding developers back.

High interest rates, conservative loan-to-value ratios, and tough presale conditions are limiting capital. While the main banks retain some appetite, many developers are turning to second- and third-tier lenders to get projects off the ground.

As Vaughan notes, “Finance can be the dealbreaker. Even for otherwise viable projects.”

Mitigation: Engage early with lenders to understand their current requirements and appetite. Develop a realistic funding strategy and stress-test it under various market scenarios. A well-prepared feasibility study backed by current market evidence and formal valuation can improve the likelihood of securing finance from first-tier lenders.

3. Infrastructure Funding Gaps

Challenge: Central and local government budgets are stretched.

Many councils are approaching debt ceilings, limiting their ability to fund infrastructure for new developments. This disproportionately affects greenfield projects and regional growth areas.

Mitigation: Smaller developers should prioritise sites with existing infrastructure or consider partnerships to share costs. Early conversations with councils help identify constraints and opportunities.

Large-scale developers may be able to create their own solutions. In Milldale, Vaughan notes that “When government and Auckland Council funding was insufficient, Fulton Hogan Land Development partnered with Crown Infrastructure Partners in a pioneering programme to create a new financing model. Infrastructure costs were paid upfront by the developer and are recovered through an annual ‘infrastructure payment’ collected via Auckland Council rates bills from each new homeowner.”

4. Zoning and Planning Frameworks

Challenge: Planning rules vary significantly and are in transition.

District and Unitary Plans differ between regions, and overlays or zoning rules often shift. New Zealand is currently transitioning from the Resource Management Act (RMA) to a new three-part framework: the Natural and Built Environment Act, Spatial Planning Act, and Climate Adaptation Act. Each carries implications for how and where you can build.

The National Policy Statement on Urban Development (NPS-UD) and Medium Density Residential Standards (MDRS) are designed to support urban intensification, but implementation differs by council.

Mitigation: Work with a planning consultant early. Confirm the site zoning and understand what’s permitted, restricted, or prohibited. Pre-application meetings with councils can surface red flags before formal lodgement. Track how each council is interpreting national reforms – timing and outcomes may vary by region.

5. Consenting Delays and Costs

Challenge: Gaining consent takes time and can derail timelines.

Although the statutory timeframe for a simple consent is 20 working days, Requests for Information (RFIs) often lead to significant delays. Incomplete applications, mid-process design changes, or notification triggers can push timelines from weeks into months, or longer.

Mitigation: Submit complete, professionally prepared applications. Engage experts (geotechnical, stormwater, traffic) and choose consultants with a solid track record with the relevant council. Pre-application meetings can highlight potential delays early. Plan for 5–10% of project costs to be absorbed by consenting and related fees. Buffer your timeline and budget to allow for delays or negotiation of consent conditions.

6. Market Volatility

Challenge: Shifting interest rates, buyer sentiment and construction costs can undermine project viability.

Unexpected market turns can affect margins or result in developments failing to meet revenue targets.

Mitigation: Model best-, worst-, and base-case financial scenarios. Research recent sales for comparable stock. Understand the needs of your target market: families, downsizers, investors or first-home buyers. Ensure your development offering addresses that demand. Monitoring school zone changes or community group sentiment online can also help identify shifting local drivers.

7. Construction and Contractor Risk

Challenge: Ongoing instability in the construction sector poses risk.

While supply chain issues have eased and materials like timber are stabilising, cost pressures persist. Inflation is moderating in early 2025, but volatility remains. For example, recent tariffs announced by the United States may affect material pricing globally, although the impact on New Zealand remains unclear.

Mitigation: Vet your contractors carefully. Check their financial standing and prior performance. Use NZS3910 contracts and retain a quantity surveyor for oversight. Early procurement of long-lead items is still advisable. Ensure your contractors are up to date with building code and compliance shifts under the new planning legislation.

8. Neighbour and Community Pushback

Challenge: Local opposition can slow or stop developments.

Community sentiment, especially in low-density suburbs, often runs counter to intensification. This can lead to objections, resource consent notifications, and costly delays.

Mitigation: The MDRS has streamlined development rights in some zones, but uptake varies by territorial authority. As per the Ministry for the Environment’s regulatory impact summary 2023, not all councils are required to apply MDRS standards.

Transparent community engagement and thoughtful urban design can reduce opposition. Consider how your development integrates with the existing neighbourhood and how you can build trust with local residents.

9. Environmental and Site Hazards

Challenge: Natural hazards and legacy contamination pose serious risks.

Flooding, liquefaction, asbestos, old landfill material or pesticide residues are common across both urban and rural sites. Many issues are not visible on inspection.

Vaughan says: “The answer is: due diligence, due diligence, due diligence.”

Mitigation: Conduct comprehensive site investigations early. Obtain LIMs, PIMs and specialist assessments (e.g. flood modelling, contamination, geotechnical reports). Be aware that certain hazards may require additional consents or engineering solutions, adding time and cost to your program.

10. Marketing and Sales Risk
 

Challenge: Weak branding or oversupply can undermine sales.

In a competitive market, undifferentiated products may struggle. Urban apartment projects, small townhouse developments, and greenfield subdivisions all face increasing buyer scrutiny.

Vaughan’s advice: “Find the right product, and develop a targeted marketing strategy early. Know your buyers. Are you appealing to first-home buyers, investors, or downsizers? Align your product, pricing, and messaging accordingly. Look at what works. We know bedroom size is having an impact on sales and developers trying to get too greedy. Compromises to save money may come back to bite in terms of sales and pricing. Sustainability features, community amenities, and quality finishes are increasingly important differentiators in a competitive market.”

Mitigation: Create a clear point of difference. Work with property marketing professionals to define your brand and buyer journey. Build sales timelines into your feasibility and be realistic about absorption rates.

Final Thoughts

Residential development in New Zealand is more complex than ever. From infrastructure and finance to planning reform and community sentiment, every stage presents risk. But with the right team, rigorous due diligence, and a willingness to adapt, developers can still succeed — even in a challenging market.

Partnering for Success

The path to a successful residential development project is rarely linear. At Opteon, we combine local market knowledge with regulatory expertise to support your project from feasibility to final valuation.

Contact us today for a no-obligation chat about how we can support your next project.

 

Richard VaughanRichard Vaughan
Regional Director

 +64 21 819 711

 

 

Information sources:

  • Ministry for the Environment. (2023). Implementing changes to the NPS-UD and making the MDRS optional for councils. PDF

  • Crown Infrastructure Partners: crowninfrastructure.govt.nz

  • Stats NZ. (2024). Building activity and inflation data.

  • (2024). Building Code updates and compliance framework.

 

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