Overview

Institutions providing access to housing in all tenures have become further entrenched and exposed to financial risk. Literature on housing policy trends and financial risk cover drivers such as liberalisation, monetary approaches, innovation, political commitment, and asset management.

A conceptual model is put forward for framing housing policy trends that engage with financial risk (what risk and whose risk) – tested against national cases of United States, China, United Kingdom and New Zealand. Secondary literature findings for the New Zealand case show that there is tendency to focus on the downside financial risk of known probabilities, rather than seek out unknown upside financial risks that may have escaped detection.

Furthermore, it is argued that contemporary housing policy trends have incentivised institutions to take on greater financial risk. Further empirical work will generate primary data to quantitatively model in the New Zealand case, what and why there is financial risk, and institutional responses to housing policy trends.

To understand how this climate has come about, the literature and models introduced in the NZ valuation profession to estimate partial interests are reviewed and their historical context described. The extent of leasehold land currently in NZ is examined to gauge its size and importance in the NZ property market. The categories of leasehold are further examined (i.e. commercial, residential and rural), so a sense of the relative size in each sector is apparent. A sample of six conventional leasehold models put forward by the NZ valuation profession are evaluated. Thereafter, contemporary growth explicit models are proposed, drawing on research from UK professors Andrew Baum and Neil Crosby, but adapting their modelling within the context of NZ. The research paper aims to provide a valuation model with a logical and accurate basis for valuing partial interests.