Labour policies will boost property sector performance
The industrial and office sectors are likely to be the major beneficiaries from the election result last weekend upon a review of the Labour Party’s manifesto and policies, according to Colliers International.
Following three years of a coalition government, preliminary results show Labour secured 49 per cent of the vote on election night, providing 64 seats in parliament from the 120 seats on offer. The Labour Party is now able to govern alone and can claim a mandate to progress the policies set out within its manifesto.
Industrial boost from $14b spend-up
“The programme – one of New Zealand’s largest spend-ups on infrastructure projects across the country – will be a clear boost for the industrial construction and civil engineering sectors.
It is intended that the first five transport projects in the programme will be launched over the next few months including the Penlink in Auckland and the Tauranga Northern Link.
Government policies targeting the building of a further 8,000 state homes by 2024 will support state and private development activity via a $350 million Residential Development Response Fund, aimed at kickstarting stalled or at-risk projects.
School and hospital additions and upgrades are also proposed. Hospitals will benefit from a $195 million investment with projects impacting 17 hospitals, health centres and other medical facilities across the country. New schools and new classrooms in areas experiencing high population growth are also in the pipeline of projects.
“Not only will the industrial sector benefit, but the office sector is also a winner,” says Little.
“The ramping up of infrastructure projects will see an increase in demand for commercial office space. A more certain project pipeline will see providers such as project managers, civil engineers, architects and construction companies increasing staff numbers, generating demand for office accommodation.”
Continued support for developers and homebuyers
A reduction in planning barriers to development activity which includes replacing the Resource Management Act has been proposed.
“If successful, this could be a big win for the development sector,” says Adrian Goh, Research Analyst at Colliers.
The Labour Party has also committed to continuing their support for first home buyers via First Home Grants, loans and KiwiBuild. The KiwiBuild scheme is to be modified and will permit KiwiBuild homes to be sold to progressive home ownership providers.
“A recent study by Colliers International showed that KiwiBuild apartment projects were selling at nearly five times the rate of non-KiwiBuild projects,” says Goh.
“Up to 25 per cent (from 15 per cent) of KiwiBuild homes in an underwritten development may be sold on the open market to further incentivise lenders and developers to keep delivering new housing.
“We expect this will continue to apply pressure on land values which have already been in high demand and popular with a wide range of investors and developers,” says Goh.
Office sector boost nationally
The public sector traditionally experiences growth under a Labour-led administration, increasing demand for office space within the capital.
Little says this is a trend likely to continue this term.
“The government already occupies approximately 35 per cent of office space in Wellington’s CBD.
“Over the next three years, we may see a rise in RFPs and business cases considering the transfer of government functions to other regions.”
This was a policy under the previous coalition government. It was initially investigating the possibility of moving some functions to alternative locations within the Wellington region with a wider range of geographic locations could be considered.“This has the potential to boost office space demand nationally at a time when office vacancy rates have been rising across most centres,” says Little.