Chinese property purchases


CBRE-FPAccording to CBRE, Chinese investors are more interested in the US, Australia and the UK while Kiwi investors are the most active in the local commercial property market.

“While some are fixated on Chinese investment, our research shows that of a total US$15 billion of Chinese external global property investment in 2015, New Zealand saw one per cent of that total. That compares to 30 per cent going into the US, 24 per cent into Australia and 12 per cent into the UK,” says Andrew Stringer, CBRE NZ’s national director of Capital Markets.

But, led by active Kiwi investors, the boom in commercial property investment (2015 saw more commercial properties in New Zealand bought and sold than even before the GFC) is set to continue, says Stringer.

CBRE’s global research shows international investors intend to spend more than US$1 trillion worldwide on property in 2016, of which New Zealand will get “more than its fair share”.

CBRE NZ research shows the second half of 2015 provided a strong increase in the number and value of commercial transactions in New Zealand, with 136 properties changing owners at a total value of $2.8 billion – a record number of properties sold in a six-month period.

Auckland led the way with 99 sales over $5 million each in value, totalling just over $1.7 billion. Wellington had 17 transactions totalling $682 million and Christchurch 14 sales totalling $212 million.

“Kiwi investors are flexing their muscles,” says Stringer. “Private New Zealand buyers were the most active group over the past six months, making up 44 per cent of transaction volume. They also showed a strong presence on the vendor side, with 54 per cent of total transactions attributed to them.”

Offshore players were net sellers over the six months, selling NZ$1.15 billion worth of property in the second half of 2015. Australia was the most active offshore purchaser and vendor, selling $595 million worth of property, although purchasing NZ$844 million in the second half of 2015. The UK, USA and China were next most active in the offshore investment market.

On China, Stringer says: “China is to a degree playing catch-up in recognising commercial property as a vital component of investment portfolios because of its relatively stable nature, lack of volatility and relatively low risk returns.

“It has a massively increasing middle class with a strong appetite for retirement and insurance products that in turn require annuity-type income streams property can provide. Chinese demand is expected to continue to grow, short of any local policy changes.”

Stringer adds that although economic and political stability are attractive attributes, investors are attracted to New Zealand markets by strong property fundamentals. New Zealand’s market is in step with global trends and, in a globalised economy, investors are more than ever focused on gateway cities.

“They are cities of international standing. Places with a growing population and increased investment in infrastructure and where it is efficient and transparent to do business, translating into solid investment performance,” says Stringer.

Auckland is more than ever viewed in that context and, as an investment destination, is now fairly seen as equivalent to any city in the world, albeit it a small marketplace.

“The city’s growing population and maturing critical mass means the CBD has already been recognised as a destination by international luxury and fast fashion retailers – one example of the confidence being shown. Also, a record three million visitors came to New Zealand last year, 70 per cent arriving into Auckland,” points out Stringer.

With local government’s drive to create the world’s most liveable city and money going not only into public transport development but also many development nodes around the city, Auckland’s status is only set to grow, he says.

“The high volume of investment sales over the past two years shows interest is now sustained. This is not driven by easy credit or lax investment rules, but sound long-term population growth expectations, stable economic outlook and genuine liquidity,” says Stringer.

“New Zealand remains attractive to global investors, thanks to a blend of ongoing economic expansion and a relatively moderate new supply pipeline, plus comparatively high yields in a global context. Real estate’s combination of defensive ‘inflation-linked asset-backed bond’ characteristics and upside potential due to rental growth continues to look attractive.”

Looking ahead, Stringer says likely drivers of investor sentiment will be external though still focused on property fundamentals: “China’s economic performance, US elections and European and UK referenda may all come into play. Our market feedback is that current noise around US elections is largely at social levels, not business levels, so no dramatic shift is expected in investment sentiment in offshore markets.

“Essentially, we see the current level of investment activity and interest in New Zealand is here to stay, subject to normal cyclical shifts.

“New Zealand has world-class investment stock and is firmly on the radar of sophisticated international investors. With US$1 trillion seeking opportunities globally, New Zealand delivers the fundamentals to capture more than its fair share.”