The head of global research at CBRE says that the yields from New Zealand commercial property are among the highest on the planet. Nick Axford said recently that Auckland office buildings are 7.73 per cent, while Tokyo are approximately 3.5 per cent. Hong Kong yields are less than 3 per cent.
Auckland, NZ, skyline
Dr. Axford went on to say that investors consider commercial property as a strong hedge against potential inflation. He also said that property yields are “much more attractive than yields that are currently available from bonds.”
According to Dr. Axford, investors have been focused on where they can go to get secure, bond-type investments in the face of uncertainties facing the world. Understandably, they are looking for a high yield. Since companies sign long leases and tend to keep paying their rent as long as they are in business, investors can count on a steady stream of income.
Dr. Axford stated that investors are looking at short-term growth prospects, the quality of the leases, the companies and buildings, security and stability of the political system, as well as land title rights when making a decision. Demand has pushed prices for good-quality investment property to high levels in several markets around the world.
New Zealand is a relatively small market but it offers many of the things investors are looking for, including stability, quality property, quality of income, and potential growth through the economy. Dr. Axford also says that this market can offer investors property at a relatively attractive price compared to many other markets.
He says investors are still nervous about the impact of changes in monetary policy in other countries, particularly in the United States, where the Federal Reserve has been effectively printing money at the rate of $85 billion per month. In more normal times, this action would fuel inflation, but currently it is not.
Dr. Axford says the time may come when an inflation hedge, like prime property, could become even more valuable than it is right now.
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