New Zealand Report
2018 property market bounce expected
PROPERTY & BUILD
Office, industrial and tourism growth to continue in 2018, Colliers International CEO Mark Synnott predicts
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bounce in New Zealand's commercial property market looks likely in 2018 after a significant slowdown around last year’s election, with the industrial, office and tourism sectors all continuing to show promising signs of growth. However, uncertainty around
the implementation of foreign ownership restrictions may put off some overseas investors, resulting in a shallower pool of buyers at the top end of the market. We expect on- and off-market sales volumes will trend upwards as vendors look to offload the significant amount of stock that
remained unsold during the latter months of 2017. Corporate owner-occupiers will continue to divest via sale and leaseback to free up capital to invest in their businesses, while significant institutional and private investors will offload non-strategic assets to improve the quality
of their portfolios. The room for further yield compression is small, but still possible in prime assets. However, the major contributor to capital growth will continue to be rental growth, driven by record low vacancies and new supply not meeting demand.
Offshore attraction
New Zealand will continue to be attractive to offshore investors, thanks to ongoing net immigration and GDP growth, coupled with little likelihood of material interest rate rises. However, the government’s proposed foreign ownership restrictions are likely to create uncertainty until there is greater clarity about what types of assets will be caught in the Overseas Investment Office’s net. We expect this will have the biggest impact at the top end of the market, where the pool of local buyers is shallow. Of the 12 Auckland commercial property transactions worth $50 million or more last year, only one was sold to a local buyer. The property at 2-4 Fred Thomas Drive, Takapuna, was sold by Colliers International to syndicator Maat Group for $60.85 million, representing a yield of 7%. New Zealand’s ongoing tourism boom will continue to buoy the commercial property market, particularly the hotel and retail sectors. Visitor arrivals are likely to top 4 million this year, after a record 3.7 million arrivals in the year to October 2017.
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YEARBOOK 2018 PROPERTYANDBUILD.COM