Real Estate Dorota Dyman & Associates blog: Foreign funds eye NZ commercial real estate
by Kirk Stafford Dorota Dyman & AssociatesInternational
investors with a total of US$2 trillion ($2.34 trillion) in funds have put New
Zealand in their top-10 list of Asia-Pacific real
estate investment targets.
A
survey out this month from the Association of Non-Listed Real Estate Investors
put New Zealand on its list for the first time, said Justin Kean, JLL New
Zealand's head of research and capital markets.
New
Zealand was ranked eighth.
"The
association represents investors with a total portfolio of some US$2 trillion.
If international investors allocated just 1 per cent of their assets to the New
Zealand market, we would see $20 billion of capital head this way."
Kean
said about $2 billion of commercial real
estate going for $5 million-plus was sold throughout New Zealand.
That
survey comes after Chapman Tripp said last week that more foreign buyers were
likely to make bids for New Zealand assets this year with China at the
forefront.
The
law firm has released its view on trends and insights into New Zealand mergers
and acquisitions and has picked foreign investment as an important trend in
2014.
Kean
said international investors saw New Zealand as a key Asia-Pacific location.
"The
economy in New Zealand has seen a good organic economic recovery kick in in the
last 18 months. Positive pressure is warranting a firming of cap rates which is
being driven by a weight of both local and now international capital.
"Institutional
investors are back in a buying mode and this means that foreign wealth will
start finding its way into the New Zealand property market," he said.
This
year Japan ranks in first place as the most desirable place to buy property,
with Australia second.
Previously,
New Zealand was in the "other countries" category, Kean said.
"We
don't have enough real
estate to satisfy that demand. So the natural result should be there
will be an upward pressure on prices.
"If
a large asset were to come to the market, this would suggest it would be hotly
contested among international buyers.
"If
there was a big shopping mall or a commercial office block, local investors
would have a lot of trouble keeping up with the pricing of foreigners.
"If
you're in Switzerland and your cost of capital is 1.5 per cent, you can bid at
a much higher price and still make the money you want but Precinct Properties
or Kiwi Income Property Trust have to make a return commensurate with the rest of
their portfolio," Kean said.
"We
are aware of some trophy assets coming to the market. They're currently
confidential but that will come along shortly. They're worth more than $100
million."
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