New Zealand’s commercial property sector remains an attractive market for investors according to the latest Property Council / IPD New Zealand Property Index. 
Speaking at the results launch, Dr Anthony De Francesco, executive director MSCI highlighted a relatively buoyant commercial property market.
“Investment return performance for the commercial property market remains relatively strong with the market delivering an annualised total return of 12.7 per cent to September 2016. However, the market appears to be stabilising with the September quarter results showing a slight softening to the June quarter.
“We are also seeing cap rates continue to firm across key sectors. Indeed, cap rates are now hovering below rates recorded in 2007. A similar scenario on market pricing is evident for the Australian commercial property market. This is mainly driven by strong capital flows into New Zealand’s investment market and the strong demand from Asia for New Zealand property assets due to their attractive high income return.”
Total returns for the September quarter for both retail and office property sectors were up 1.8 percentage points and 0.6 percentage points respectively on the same period in 2015. And at 12.7 percent for the year ending September 2016, this result is well above the ten-year average return of 10.7 percent.
New Zealand property continues to stack up well internationally performing well above the United Kingdom at 4.2 percent, Japan at 8.8 percent and the United States at 10.1 percent.
Property Council’s chief executive, Connal Townsend says that the news is good for the commercial property sector, and investors looking to purchase commercial property in New Zealand.
“The market did appear to moderate post Brexit, however in light of recent global economic events New Zealand commercial property remains the silver lining in a sometimes uncertain global property market.”
He cautions however, even with the favourable news, Government (local and central) needs to take a proactive approach so as to ensure the commercial property sector remains resilient to a downturn.
“There is a need to reduce exorbitant regulatory charges and remove cross-subsidisation. We must ensure the commercial property sector is not slapped with further regulatory costs. A good start would be allowing commercial properties to be depreciated.”
