New Zealand Investment Property

In a market where interest rates have risen, house prices are stagnant and domestic and international property investor interest in residential real estate is flagging, what does the future hold for New Zealand investment property?  According to the Chief Economist from a leading Australasia based bank, the New Zealand commercial property sector is the place to invest for strong yields, long term gains and maximum security.

The chief economist from Westpac Bank believes that New Zealand investment property in the commercial sector will continue to offer investors excellent returns particularly over the coming eighteen months as yields from prime real estate increase as underlying commercial property prices stagnate or decline in real terms and rental income increases due to a shortage of supply.

It has been predicted that A grade commercial space will become scarcer in supply and vacancy rates will drop even though a certain amount of new construction of prime commercial space is underway.  The reasons for this are simply that construction costs are high in New Zealand at the moment resulting in high replacement costs.  In Auckland especially, vacancy rates of completed quality commercial property are at their lowest levels in a decade resulting in increasing rental rates being charged.

The commercial property sector in New Zealand is a particularly attractive sector for the property hungry Australians and New Zealanders whose own residential real estate markets have currently run out of steam.  An added bonus for Australasian investors is that capital gains tax is not payable on profits derived from NZ commercial property investments in either Australia or New Zealand meaning that investor interest in this particular sector could surge in the coming months.

In fact, there is already an increasing supply of international investment filtering into commercial property in New Zealand as individual and corporate entities from around the world seek lower risk returns from property market sectors offering strengthening and sustainable yields rather than boom bust movements in terms of capital gains.

The main market sectors that have attracted investment in recent years are the retail sector as new malls and shopping centers have opened in the major New Zealand urban centers, and also prime office space.  Now that interest rates have risen, petrol prices are restricting the economy and GDP growth rate forecasts in New Zealand are less than impressive, it’s likely that retail based commercial property will present a higher risk commodity compared to the office sector and risk averse investors looking for yield, stability and long term, steady capital appreciation should consider the office market sector.

Special Reports: Property News for New Zealand

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