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Rise in foreign investment drives property confidence

Confidence in New Zealand’s Commercial Property sector is at its highest levels since 2017, a market survey of local industry professionals released today by the Royal Institution of Chartered Surveyors (RICS) and the Property Council New Zealand (PCNZ) has found.

The RICS-PCNZ Q4 2019 New Zealand Commercial Property Monitor shows the sector has been buoyed by an increase in investment demand fuelled by both domestic and foreign investors.

In further positive news for the sector, the Monitor recorded Occupier and Investment Sentiment Indices, composite measures capturing overall market momentum, have continued to rise.

RICS Country Manager, New Zealand, Michelle Manley said the results reflect the increasingly positive mood right across New Zealand’s Chartered Surveying and commercial property markets.

“There has been a very encouraging shift in the mood of the market, with the share of respondents who saw the market in a downturn phase declining from 44 per cent in Q3 2019 to 23 per cent in Q4 2019,” Ms Manley said.

“This is a significant decrease and bodes extremely well for the sector as we begin the new decade.”

As in previous quarters, commercial property in the North Island is expected to outperform those in the South Island. Headline rental and capital values are expected to increase between 2.5 and three per cent in the North compared to only zero and one per cent in the South.

Property Council New Zealand CEO Leonie Freeman welcomed the results, however noted a sharp increase in respondents reporting a deterioration of credit conditions.

“Many respondents are beginning to warn that finance for new developments and business lending is increasingly becoming an issue, and some have seen the main trading banks start to turn the tap off in this sector,” Ms Freeman said.

“While it is too early to say definitively, this does create a genuine risk that we may start to see restrictions in the building of new commercial stock.”

The Q4 2019 New Zealand Commercial Property Monitor indicates the local market is performing more strongly than Australia across a range of recorded measures.

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