What lessons can be learned from Covid and the buying activity that occurred in the months that followed?
‘As safe as houses’ has proved its enduring relevance. There’s been a flight of capital to the security of bricks and mortar – be it residential, commercial or industrial. We’ve seen particularly strong demand for residential and industrial development land, logistics facilities and other Covid-proof assets backed by essential services. As a result, commercial property sales volumes have been trending upwards, and we’ve witnessed record pricing on a quarter on quarter basis. This is likely to continue throughout 2021.
Is NZ's reputation as a safe harbour growing and will this have an impact on the market this year?
Brand New Zealand continues to strengthen on the global stage. The resilience of our economy, stable democracy, low corruption, and adherence to the rule of law put us in a strong position to continue to be a safe haven for capital.
The America’s Cup is a huge boost to our brand. New Zealand is the only country in the world right now able to host a major international sporting event in a safe, Covid-free environment. This is likely to inspire a large number of well-qualified offshore immigrants to move here once the borders open – bringing even further capital and competition to the market.
What are the main opportunities for investors this year? Where will the money head to?
With a growing number of Kiwis returning home for the lifestyle and the ability to safely work from home, there is intense competition for housing and residential investments. This presents huge opportunities for residential development, land sales and the ‘built-to-rent’ sector.
Regional New Zealand is also going to boom. People who can afford to stay in Auckland will buy here, but others will look to buy the same quality in a more affordable region like Waikato or the Hawke’s Bay. ‘Work from home’ will become ‘work from the provinces’ – I recently met a marketing manager who’s employed in Auckland, but has moved fulltime to Foxton for the lifestyle and affordability.
In the commercial sector, low Auckland yields will contribute to price re-rating in the regions. This trend is exemplified by the recent sale of White Aluminium in Whanganui for just under $16.6 million, at a yield of 5.7 per cent. This kind of result would have been unheard of pre-lockdown. The property was purchased for syndication – another sector that will continue to attract investors, given the higher returns available in the enduring low interest rate environment.
Industrial will be the standout sector in 2021, particularly manufacturing and logistics. ‘Last mile’ logistics hubs were bolstered by the surge in online retail during lockdown – a trend that hasn’t gone away as new shopping habits become engrained. Industrial investors will be seeking assets across New Zealand that offer strong tenant covenant and long lease terms, with normally Auckland-centric buyers seeking out prime assets in the regions. Pressure will continue on industrial yields due to a lack of opportunities.
What should the market be concerned about this year?
The market will be keeping a close eye on Covid, locally and internationally, and its impact on the wider economy. Another lockdown would be a concern, but the economy and property market have shown great resilience, and the mood is strong. Colliers has just invested significantly in the fit out of our new headquarters at 188 Quay Street, which highlights our ongoing confidence in the market throughout 2021 and beyond.
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