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As residential property returns dwindle commercial property will rise

Investors are planning to add to their portfolios in the coming year but mainly outside residential property.

Tuesday, February 8th 2022, 12:21PM

by Sally Lindsay

A survey of investors by independent economist Tony Alexander shows the most favoured assets for portfolio additions are shares either directly or through managed funds, exchange-traded funds (ETFs) and commercial property.

For the 15% of people looking to invest this coming year in commercial property, 49% will look for industrial or warehouse premises.

The next most favoured, and well back, is office accommodation at 9% of investors, alongside 9% who will look for retirement/rest homes.

“The latter is a growing sector as the population ages, and it is notable that advertising of such facilities looks to have increased in recent times along with construction of new premises according to data from Statistics New Zealand,” says Alexander.

Over the three months the survey has asked about commercial property, there are as yet no clear trends.

Globally, demand for industrial/logistics investments has been high for some time as businesses have moved to hold greater stocks of materials, and consumers have shifted towards more shopping online.

“We know from the past few decades there can be some large shifts in returns and preferences for different classes of commercial property assets.

“It will be interesting to see where the next shift will occur. When it does it will possibly be in the context of a changed world as we move away from a pandemic environment,” says Alexander.

He notes the sector is one in which sometimes there is excess construction which generates capital value changes unrelated to tenant demand.

Commercial property investment is often talked about as something more and more investors will shift towards as barriers are placed in the way of earning strong returns on residential property, he says.

The survey shows that for those investors looking at increasing their commercial property exposure, 44% intend doing so by buying property on their own. This is down slightly from 47% in November and 52% in October.

“This easing of self-ownership could reflect the strong demand for commercial property over the past two years, which in turn, has reduced availability at a price level accessible to many investors,” says Alexander.

Additionally, he says there are still challenges and changes underway resulting from the pandemic which inject an extra element of uncertainty to returns over the generally long period those buying property intend to hold their asset.

Residential property is still King to most investors. A gross 28% of survey participants plan to purchase residential property, which is unchanged from the previous two surveys.

Net residential property purchase intentions in fact rose to 10% in January, from 8% in both November and October.

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Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans ▲6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 4.29 5.09 5.35
Kainga Ora 5.43 4.57 5.58 5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
SBS Bank Special - 4.19 4.85 4.99
Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - ▲4.19 - -
The Co-operative Bank - Owner Occ 5.45 ▲4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 ▲4.79 5.69 5.95
TSB Bank 5.59 5.14 ▼5.79 6.15
TSB Special 4.79 4.34 ▼4.99 5.35
Unity 5.65 4.80 5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

Last updated: 19 May 2022 10:42am

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