Colliers International New Zealand has published their top 10 predictions for the year ahead in the property sector. The leading commercial real estate company are expecting the gap in New Zealand's two speed market to tighten, with residential focus diverted from Auckland into other parts of New Zealand. They are also expecting the industrial, office, and retail sectors to flourish in 2016, with an unprecedented level of growth expected in Auckland and Wellington.
1. Increasing investment demand
The environment is ripe for increased property investment according to Colliers, with low inflation, low interest rates, and strong business activity all helping to make property enticing for "yield hungry" investors. With Reserve Bank governors continuing to drive down cash and bond yields, property remains an attractive proposition for New Zealanders and foreigners alike.
2. Politics will distract from development
According to Colliers, politics and the property industry will clash in 2016. An unprecedented level of interest surrounds a number of upcoming political decisions, including the "Resource Management Act (RMA) reforms, better utilisation of public land, foreign ownership rules, infrastructure provision and further privatisation of state assets."
3. Iwi to the fore
Well known tribes such as Ngai Tahu, Ngati Whatua Orakei, and Tainui will increase their involvement in the commercial property sector over 2016, along with others from the 135 iwi in New Zealand. According to Colliers, they will be "typically seeking community involvement, long-term returns, portfolio diversification and intergenerational benefits."
4. Industrial property to keep rising
Strong demand and competitive bidding for industrial property will continue throughout New Zealand, with the industrial sectors strong rise in 2015 set to continue for at least another year. "With vacancy rates at record lows in Auckland, Hamilton, Wellington and Christchurch, tenants will have to adapt to new rental levels this year, but better business conditions will assist." said the report.
5. Demand for retail assets will continue
Despite strong predictions for the industrial sector, Colliers are expecting retail property growth to be even healthier in 2016. Large scale retail asset sales in the North Island will demonstrate the sector's dominance, with buyers advised to be careful due to complex buying and selling conditions.
6. Unprecedented growth in the office sector
The office sector is expected to shine in 2016, with strong demand, low vacancy rates, and new developments leading to a flourish of activity. While Christchurch will be an exemption, the office sector is set to break new ground in Auckland and Wellington. "Wellington's transition through government procurement and seismic ratings is now all but complete, paving the way for a new-look 2016." said the report.
7. Residential focus diverted from Auckland
While the residential market in Auckland will still be strong, Colliers are expecting new government rules and regulations to have an impact beyond the city. With an "Auckland investor effect" on house prices predicted in other regions, including Bay of Plenty and Waikato, the focus of the residential property market is likely to move away from Auckland as the gap in the two-speed market tightens.
8. Apartment building in Auckland to increase
The Auckland property market was under a lot of pressure in 2015, with strong migration levels and low supply leading to a decrease in housing affordability. With over 30,000 residents projected over the next few decades in the Auckland CBD alone, apartment construction needs to ramp up to keep up with demand.
9. Long-term demand for rural property
While a struggling dairy sector continues to decrease short-term demand throughout rural New Zealand, demand for properties in the beef, lamb, and horticultural sectors will continue to rise. While the current situation in unclear, according to Colliers, "Benefits will become clearer for the industry from the Trans-Pacific Partnership Agreement (TPPA) - the largest regional trade agreement in history."
10. The hotel industry will continue to boom
Hotels across the country will remain hot property, with increasing demand and low supply levels leading to the repricing of hotel assets. With "New highs in occupancy levels, record growth in room rates and increases in revenue per available room", the hotel sector will become an attractive proposition for many Kiwis.
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