Commercial property investors are not feeling very happy in Wellington these days, according to a survey released by a major realtor.
The gloom does not apply to the rest of the country however, with some bright spots in their confidence 'weather map'.
The industry is expecting growth nationally, and Colliers say "there is strong demand from private investors, with syndications proving popular. The expectation that the cost of debt will stay low for the foreseeable future is also encouraging decision-making."
[The following was supplied by Colliers International]
The results of Colliers International’s third quarter 2012 commercial property investor confidence survey show a widening gulf between the most optimistic and the most pessimistic cities in New Zealand.
Christchurch is the most positive city at 54% optimistic, in stark contrast to the most negative, Palmerston North, which is a full 78 percentage points behind at -24% pessimistic.
The 78% confidence gap this quarter is much greater than the 62% spread recorded in June 2012 and the 52% difference in March 2012.
The quarterly investor confidence survey asks commercial property market participants about their views on the outlook for commercial property investment over the next 12 months.
The average result for New Zealand as a whole this quarter was 11% - meaning more respondents think things will get better for commercial property investors over the next year, by the margin of 11%.
Alan McMahon, national director of research and consulting at Colliers International, says the dramatic spread between the most and least confident cities reflects the divergent expectations of regional economic prospects.
“New demand for property of whatever type arises from expansion – of population, businesses or the public sector. That extra demand can push prices up and/or or trigger new supply. Where there is an expectation of expansion then investors see a change to their benefit in the supply demand balance, and the reverse also applies.”
Christchurch, Queenstown and Auckland commercial property market participants are once again the most optimistic in New Zealand about the upcoming investment climate – albeit for different reasons, McMahon says.
“People in Christchurch have felt very upbeat about the future for some time now, which is not surprising given the lows the city has been through since the earthquakes. Over the longer term we expect Christchurch to become less optimistic about the year ahead, as some sort of normality is eventually restored.”
Queenstown’s consistent optimism can be attributed to the ongoing strong growth in tourism; while Auckland investors feel positive about the strong projected population growth which will fuel investment in the region.”
At the other end of the scale, Palmerston North is still the most pessimistic centre at a net -24%, followed by Napier and Hastings at -17% and Wellington at -16%.
“Investor confidence in these cities has been consistently pessimistic over the past year, reflecting the ongoing deferral of economic recovery. In Wellington, this is compounded by earthquake strengthening concerns and uncertainty around public sector cuts, although we expect Wellington to become more optimistic as the seismic policy impacts are better understood and are worked through,” says McMahon.
Despite the negative regional results, McMahon says there are several positive factors at work in the commercial property market. “The market has at last achieved stability and we are now waiting for growth. There is strong demand from private investors, with syndications proving popular. The expectation that the cost of debt will stay low for the foreseeable future is also encouraging decision-making.”
By sector in the main centres, Christchurch industrial investors are the most confident at a net positive 62%. Investor confidence in Christchurch’s office market increased while Wellington retail and office investors are the most pessimistic at -21% and -20% respectively.
The survey results were compiled from 5,121 responses.