Investment demand is only expected to strengthen and regional prices are expected to benefit as Auckland buyers look further afield, according to the Colliers International Asia Pacific Property Outlook 2016.
Investment demand to grow even stronger
Post-GFC global economic and financial management by Reserve Bank governors has driven down cash and bond yields, propelling property to the forefront of decision making for ‘yield hungry’ investors, the report stated.
The ‘snowball effect’ on value growth as a result of low inflation and interest rates is only gaining speed and not set to slow down in 2016.
Colliers director of investment sales Gareth Fraser said auction clearance rates are at the highest level on record at 73% as commercial investors compete for properties and chase yield.
“Demand for commercial investments and add-value opportunities continues to accelerate across Auckland. We are seeing unprecedented yields being achieved for investment grade properties in the commercial, industrial and retail sectors.”
Residential focus to shift away from Auckland
Auckland investors will look further afield this year, reducing price growth in Auckland while increasing the demand for properties in some of the other 15 regions of New Zealand.
Research and consultancy director Chris Dibble said the compound annual growth rate of residential dwellings has been 11.2% p.a. over the past five years in Auckland, compared to 7.4% over the last 20 years.
“Recent legislative changes and new regulations in China will slow the rate of Auckland dwelling price growth to long-term averages,” Dibble said.
“Investors will look further afield, creating an “Auckland investor effect” in neighbouring regions that will see regional dwelling price growth at rates not seen since 2006.”
Auckland CBD apartment building to accelerate
Structural inadequacy in Auckland’s housing supply will escalate over 2016 as Residential Project Marketing national director, Pete Evans says new dwellings are still under supplied in Auckland and building costs continue to go up due to increased demand.
“Apartments are now seen as an affordable alternative in a housing market that experienced one of the fastest and most sustained periods of price growth in its history,” said Evans.
Iwi and commercial property
Current asset-value growth will encourage greater involvement in the commercial property sector in 2016 from iwi, the report stated. This includes well known tribes such as Ngai Tahu, Ngati Whatua Orakei and Tainui along with others from the 135 named iwi in New Zealand.
National Director of research and consultancy, Alan McMahon said, “Commercial property investment for many iwi gathered momentum following Treaty of Waitangi settlements due to its ability to provide community involvement, long-term returns, portfolio diversification and inter-generational benefits.”
Office sector’s time to shine
The office sector is set to break new ground in 2016 the report states as the high demand for prime office space has driven vacancy rates to record lows and the pipeline of developments will only moderate demand slightly, particularly in Auckland.
National Director office leasing Rob Bird, says a major new Auckland CBD tower will commence in 2016.
“Significant office developments will also commence in all of Auckland’s key CBD and fringe markets including Wynyard Quarter, Victoria Quarter, Parnell, Newmarket as well as Highbrook, Westgate, Auckland Airport and North Shore,” said Bird.