Offshore money in search of a good home
Investors seeking global diversification for their property portfolios are increasingly seeing New Zealand as an attractive investment option.
Although our commercial and industrial property market is too small to attract the interest of giant global real estate investment trusts (REITs), our manageable size is regarded as an advantage by other offshore investors, and particularly those based in Southeast Asia, says Bayleys Real Estate’s international commercial and industrial director Chris Bayley.
“Our property market isn’t so large or complicated that it scares foreign investors off,” he says. “They can work it out and come to grips with it fairly quickly and we are seen as welcoming foreign investment – you can generally buy commercial property up to $100 million in value without the need for Overseas Investment Office (OIO) approval. A straightforward land title system, a limited capital gains tax and the absence of stamp duty, in contrast to Australia, as well as stable, corruption-free political and business systems help ease the pathway to foreign property ownership in New Zealand.”
This, coupled with the economy’s strong performance and the superior rental income returns that New Zealand commercial property provides, at a cheaper cost to similar properties in Asia, is attracting serious investment funds from that part of the world, Mr Bayley says.
Bayleys was involved in a number of substantial transactions to Southeast Asian investors in the latter part of 2014. These included the sale for about $185 million to Indonesian and mainland China investors of three of the four buildings the agency sold in the Spark head office complex in central Auckland; the Pakuranga Plaza shopping and office complex for $96 million to Singaporean investors; and large land holdings in East Tamaki and West Auckland for close to $90 million.
More recently, Bayleys has concluded the sale of a substantial Auckland CBD development site to a mainland China developer for in excess of $50 million, which is due to settle in March. On a somewhat smaller scale, a Hong Kong investor has bought a six-level building in Anzac Avenue in central Auckland for $6,350,000, at an 8.4% yield on its new 12-year lease to a private education provider and a Chinese investor has bought seven of the larger retail units in the Foundation, a recently completed retail convenience centre in Albany, for just over $11 million.
Mr Bayley says this strong offshore interest is expected to continue in 2015. As a consequence, Bayleys will be undertaking regular visits to Singapore, Kuala Lumpur, Hong Kong and a variety of locations in mainland China this year as well as pursuing a number of marketing initiatives. The first for 2015 will be Investment New Zealand: a Focus on New Zealand as a Property Destination which will include a portfolio of properties likely to be of particular interest to Southeast Asian investors.
Bayleys’ Asian sales director James Chan says these include large-scale commercial investment opportunities either with strong tenant covenants and/or an opportunity to add value such as with Pakuranga Plaza which had potential for apartment buildings to be developed on part of its land; substantial commercial, industrial, residential and mixed use land holdings, particularly where development feasibility studies have been undertaken; and properties which have a business and/or leisure component such as vineyards, food production facilities, hospitality premises and accommodation complexes, golf courses etc.
Mr Chan will be visiting Hong Kong, Ghangzhou and Shanghai in mid March promoting the Investment New Zealand portfolio and touching base with Bayleys’ large database of clients in these cities as well as meeting potential new investors.
At the same time, Mr Bayley will be showcasing the portfolio in Singapore and Kuala Lumpur and participating in seminars on New Zealand investment and immigration. Bayleys has been presenting on the New Zealand property investment market for the past three years at these seminars organised by consultancy company Euro-Asia and run in conjunction with ANZ, business advisers and accountants Crowe Howarth and immigration consultants Malcolm Pacific.
“Attendees are prequalified and must have a significant amount of capital to invest and many have expressed an interest in moving to New Zealand. The seminars are then followed by one-on-one meetings with investors who have a particular interest in acquiring property or property-related businesses.”
