The World’s eyes turn to NZ
Kiwi property market returns are attracting global investors, writes Catherine Harris.
NEW ZEALAND property market returns are now among the strongest in the world.
That’s according to a recent Colliers’ capital markets report, which reviewed major gateway cities in the US, Europe, Asia, Australia and New Zealand.
It found that New Zealand was emerging as one of the preferred property markets for global investors, with prime average commercial office, retail and industrial yields in Auckland and Wellington typically higher than their global counterparts.
In some sectors, the yields were almost 400 basis points higher. Hong Kong’s CBD office yields, for example, were 2.60 per cent compared to Auckland’s 7.70 per cent.
Retail yields in London’s High Street were 2.75 per cent compared to Auckland’s 6.25 per cent, and Seoul’s industrial yields of 4.10 per cent compared to Wellington’s 8.25 per cent.
Foreign investors accounted for almost half the total value of properties sold for $5 million or more in New Zealand last year, one fifth of all transactions.
Chris Dibble, Collier’s national manager of research at Colliers International, said the world’s largest investment funds were now turning their eyes towards New Zealand commercial real estate.
‘‘While New Zealanders typically provide the lion’s share of purchasing activity, the motivations of offshore parties – searching for higher returns and asset diversification in a world with super-low interest rates and strong competition – have changed our investor landscape.’’
Colliers estimates that $6.9 billion worth of commercial property was sold in New Zealand last year, which rose to a record $8.2b if significant joint ventures were included.
The total included about $1.8b for properties worth less than $2m, and another $900m for sales between $2m and $4.9m.
Previously the market’s best year was 2007, when $7.1b worth of property changed hands.
For the majority of properties bought for less than $5m, purchasers typically borrowed money locally, illustrating that overseas buyers were more interested in bigger purchases.
Andrew Reed, international director of capital markets at Colliers International, said purchasers from Australia, China, Singapore, Malaysia, Indonesia and Japan had been the stalwarts of the New Zealand market for two decades.
‘‘However, in the past, many of the larger listed and private investors shied away from New Zealand, citing distance and market liquidity as barriers to entry. This view changed in 2014 – it was a defining moment in New Zealand’s history books.’’
As a result, New Zealand commercial property values were appreciating quickly.
‘‘This is similar to what Australia has been experiencing for several years.’’