Isolation from geopolitical turmoil is helping to drive overseas investment
New Zealand’s isolation has become one of its biggest assets as offshore investors look to buy real estate in a stable economy isolated from tumultuous world events, says investment property specialist Simon Felton.
Felton, a Colliers International broker specialising in Auckland CBD real estate, was this year named the Real Estate Institute of New Zealand’s Commercial and Industrial ‘Rising Star’ at the 2017 REINZ Awards.
He says prime CBD assets are strongly favoured by overseas buyers.
“Much of the offshore interest is from institutional investors who, globally, outnumber private buyers almost three to one.
“Among these institutional buyers, there is currently a big demand for prime Auckland CBD assets, specifically ‘trophy’ properties, which has resulted in a significant shortage at the top end.
“As our market is still relatively small by international standards, the main problem we face is that we simply have very few properties that are in a premium price range for global institutions and funds to justify spending too much of their time looking for investments in New Zealand.
“This has meant that most of the available properties in the high dollar range of $50 million or more have achieved historically record yields and prices per metre.”
Felton points to recent transactions such as the sale of the NZI Centre at 1 Fanshawe Street, which sold to a Singapore-based institutional investor for $63 million.
The transaction, brokered by Colliers International’s Capital Markets team, was the largest sale of a leasehold property in New Zealand this year.
Felton has sold well over $100 million of commercial real estate over the last two years, including two substantial inner city office towers at well over $50 million each.
He completed a Bachelor of Property degree at the University of Auckland before travelling the world looking at different property markets, and was Colliers International’s ‘Rookie of the Year’ in 2016.
Felton says the key driver of overseas interest in New Zealand property is the strength of the overall investment environment.
“New Zealand has gained a reputation as the ‘Switzerland of investment real estate’.
“Additionally, geographic isolation from world events, rich natural resources and a relatively stable geopolitical environment have meant that New Zealand is an attractive place to invest for the global market.
“While North Korea, Trump and Brexit have loomed large in the headlines this year, New Zealand has been relatively insulated from the world’s turmoil.
“Even the Bay of Plenty floods, the recovery from last year’s Kaikoura earthquake, and the most uncertain election in years haven’t managed to dent New Zealand’s stable economy.”
Felton says New Zealand continues to enjoy some of the strongest economic growth in the OECD, putting the country in a very enviable position.
“Our driving factors include abundant natural resources, a strong tourism sector, and we have enjoyed net positive migration for the last four years running – an indication that we are globally desirable.
“The future is looking pretty good too. Strong population growth of 1 million people, 26 per cent, over the last two decades has not only spurred growth in almost every industry – it also has the dual benefit of giving businesses more insulation in a possible downturn scenario.
“Our strong economy has been a major benefactor from the phenomenon of globalisation; the internet and speed of information flows mean that we are as interconnected as possible, while also maintaining our geographical separation – this particular facet cannot be overemphasised.
Felton says the biggest speedbump for offshore institutional investors may be the new government’s proposal to tighten Overseas Investment Office regulations.
“However, these restrictions may end up serving to increase our global attractiveness.
“Unlike the past where our geographical separation has resulted in the negatives of higher costs of imported goods, difficulty obtaining skilled workers and late adoption of major global breakthroughs I think the reverse is now true
“New Zealand’s isolation has become one of our biggest assets.”
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