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Property investor confidence hits record highs
The survey which asks questions about expectations of market fundamentals over the year ahead showed national confidence to have reached a net positive result of 38%, surpassing the previous high of 32% recorded in the final quarter of 2018.
The proportion of those holding an optimistic view of prospects for the year ahead stood at 51% in June 2021, the highest on record.
Correspondingly, the proportion of pessimists fell to the lowest level since December 2018.
The result is even more remarkable given that it comes just 12 months after sentiment had fallen to a net negative rating of -19%.
Sectoral variances continue
While overall sentiment is positive, there continues to be a variance in confidence levels across asset classes.
The overall score is heavily
Investor confidence across New Zealand has hit a record high, according to Colliers’ latest commercial and industrial investor confidence survey
driven by the extremely positive outlook for the industrial sector, which has proved to be the most resilient over the last year. Despite easing from peak levels reached in March 2021, it continues to generate the highest rating with a net positive score of 63.8%.
But it’s not all about the industrial sector. Views on the prospects for the office market have rebounded strongly.
In June 2020, confidence stood at a net negative -25.7%, the lowest rating recorded since September 2010. Confidence returned to positive territory in the closing quarter of 2020, but has strengthened significantly, generating a net positive rating of 29.1% in June 2021.
While the retail sector’s rating, a net positive 3.9%, appears low in comparison, it is a remarkable turnaround in sentiment from June 2020 when its rating stood at a record low of - 67.4%.
Furthermore, the June 2021 figure is the first time a net positive score has been recorded in two and a half years and its highest since late 2017.
It’s a national story
The increase in commercial and industrial investor confidence has been reflected across the country with all 13 regions surveyed recording net positive
70% 60% Percent of respondents 10% 20% 30% 40% 50% 0% Change in Retail Sales Value By Region Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 DeDec-17 c 20 Jun-1820 –Dec-18 Ma Jun-19r 202Dec-19 1Jun-20 Dec-20 Jun-21
Optimistic Neutral Pessimistic country with all 13 regions surveyed recording net positive scores, only the third time this has occurred since the survey began.
From a regional market perspective, Hawke’s Bay generated the highest proportion of positive responses in June 2021 with a net positive score of 61%. This saw Hamilton slipping to second place overall having topped the regional list in March 2021. Third place went to Nelson with a net positive 54.8%.
Regions with economies heavily dependent upon tourism saw sharp declines in confidence ratings during 2020, but have all rebounded. Queenstown generated a net negative score of -14% in the September 2020 quarter survey and was the only region to register negative sentiment in the March 2021 survey. Rotorua’s net score was -15.7 at the end of 2020.
Both regions, however, have mirrored the national trend with sentiment lifting sharply over recent months. Queenstown registered a net positive score of 36.5% in June 2021, while confidence was even higher in Rotorua with a rating of 44.8%.
Source: Colliers Research
National investor confidence by sector
New Zealand Research Report | August 2021 | Colliers Research National investor confidence by region
80%
60%
40%
20%
0%
-20%
-40%
-60%
-80%
New Zealand Overall Office Industrial Retail Jun-20 Net Percent Jun-21
-75% -50% -25% 0% 25% 50% 75%
Hamilton Tauranga/Mt Maunganui Nelson Dunedin Napier/Hastings Whangarei Palmerston North Wellington New Plymouth Auckland Christchurch Rotorua Queenstown New Zealand Overall
Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17
Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 Mar-21
scores, only the third time this has occurred since the survey began.
Across the three main centres, Wellington led the way with a net positive score of 35.4% only slightly ahead of Christchurch at 31.7%. While still comparably strong, Auckland registered a net positive 30.0%.
From a regional market perspective, Hawke’s Bay generated the highest proportion of positive responses in June 2021 with a net positive score of 61%.
This saw Hamilton slipping to second place overall having topped the regional list in March 2021.
Third place went to Nelson with a net positive 54.8%.
Regions with economies heavily dependent upon tourism saw sharp declines in confidence ratings during 2020, but have all rebounded.
Queenstown generated a net negative score of -14% in the September 2020 quarter survey and was the only region to register negative sentiment in the March 2021 survey. Rotorua’s net score was -15.7 at the end of 2020.
Both regions, however, have mirrored the national trend with sentiment lifting sharply over recent months.
Queenstown registered a net positive score of 36.5% in June 2021, while confidence was even higher in Rotorua with a rating of 44.8%.
Source: Colliers Research Note: Net percentage of respondents who are optimistic versus pessimistic Reasons for optimism and caution evolving Survey participants have New Zealand Research Report | August 2021 | Colliers Research 2 been asked to outline primary reasons for optimism and pessimism over the year ahead. The primary reasons for optimism cited have been the strong performance of New Zealand’s economy, successful management of the pandemic and the low interest rate environment. Further underpinning sentiment is the increas-
ing momentum of vaccine rollouts, both nationally and internationally, raising the prospects of the easing of border restrictions.
The most cited reasons for caution were the prospect of rising interest rates and the possibility of further lockdowns resulting from a re-emergence of COVID-19 in the community.
It is likely that the latest survey results will show optimism at or close to the peak of confidence in this cycle as monetary policy becomes less accommodative.
With positive property market fundamentals in play though, a moderation in optimism, as opposed to a sharp correction, is the most likely scenario. However, we still expect to see high levels of net positive confidence ahead.
Residential market confidence remains at elevated levels
Confidence in the outlook for residential property market pricing uplifts across the country remained at elevated levels in the second quarter of 2021, according to results from Colliers’ latest residential property market outlook survey.
While down from the record high net positive score of 72.8% recorded in March 2021, the June 2021 quarter’s rating of 62.5% is the fourth highest on record and significantly ahead of the long-term average of 35.2%.
Results of surveys over the last year illustrate the rapid change in sentiment surrounding the residential market.
A net negative score of -15% in the June 2020 survey reflected initial concerns that the impact of the Covid-19 pandemic could result in a significant fall in values. A majority of respondents in nine of the 13 regions surveyed expected values to fall over the year ahead while values were expected to rise in just two.
Concerns, however, dissipated quickly as value growth accelerated in the second half of the year, supported by a lower interest rate environment.
By December 2020 the outlook for values was heavily skewed towards growth in all regions.
Sentiment buoyed by market’s strong performance
The positive sentiment across the country was again reflected in the June 2021 survey. The regions generating the highest net positive scores were Hamilton at 69.2% and Hawkes Bay at 67.1%. Both have edged ahead of Tauranga / Mt Maunganui which topped the rankings in both the December 2020 and March 2021 surveys.
Confidence has also remained high across the major centres with Auckland, Wellington and Christchurch all generating net positive scores of between 52% and 58% in the latest survey.
Regulatory changes moderate views...
Changes in government and Reserve Bank policies
National residential median price outlook
80%
New Zealand Overall
Net Percent 60%
40%
20%
Average
0%
-20%
Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19
Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21
aimed at cooling the market have seemingly slowed market pricing expectations.
The Reserve Bank has indicated that it is to phase out the stimulus measures put in place to support the economy through the Covid-19 pandemic. It is increasingly likely therefore that increases in interest rates will begin prior to the end of the year.
The investor sector faces additional headwinds following the reintroduction of LVR restrictions and the extension of the bright-line test to 10 years.
Other proposals are currently under consultation including the ending of the ability of investors to offset interest on loans used for residential properties as an expense against their income from those properties.
More recently the Reserve Bank has advised that it is to consult on further tightening of LVR rules, which could be implemented in October 2021, and the possible introduction of a debt-to-income restrictions.
But bolster confidence in the new build sector
The government has, however, looked to support the development of new housing by skewing demand to the new build sector.
It is therefore proposing that, for new build premises, the brightline test should be held at five years while interest deductibility allowances will remain.
These policy positions have underpinned confidence in the new build sector, reflected in results from Colliers’ surveys.
Respondents on the Auckland, Wellington Christchurch and Queenstown markets are asked for their views as to how various sub-sectors of the market will perform over the year ahead.
In all locations, confidence was higher for new build stock - both apartment and terraced and detached housing, than for existing property.
Sentiment within the new terraced and detached housing sector were particularly strong in Auckland and Wellington, generating net positive scores of 63.4% and 63.2% respectively.
Regulatory changes moderate views….. Changes in government and Reserve Bank policies aimed at cooling the market have seemingly slowed market pricing expectations. The Reserve Bank has indicated that that it is to phase out the stimulus measures put in place to support the economy through the Covid-19 pandemic. It is increasingly likely therefore that increases in interest rates will begin prior to the end of the year. The investor sector faces additional headwinds following the reintroduction of LVR restrictions and the extension of the bright-line test to 10 years. Other proposals are currently under consultation including the ending of the ability of investors to offset interest on loans used for residential properties as an expense against their income from those properties. More recently the Reserve Bank has advised that it is to consult on further tightening of LVR rules, which could be implemented in October 2021, and the possible introduction of a debt-to-income restrictions. But bolster confidence in the new build sector The government has, however, looked to support the development of new housing by skewing Looking to the short-term future, confidence levels are Source: New Zealand Green Building Council, Colliers Research *Includes Office Design Rating, Office Built Rating & Custom Design Rating demand to the new build sector. It is therefore proposing that, for new build premises, the brightline test should be held at five years while interest deductibility allowances will remain. likely to moderate as the These policy positions have underpinned confidence in the new build sector, reflected in results from impact of the new regula-Colliers’ surveys. Respondents on the Auckland, Wellington Christchurch and Queenstown markets are asked for their views as to how various sub- tory backdrop is assessed sectors of the market will perform over the year ahead. In all locations, confidence was higher for new build stock - and value growth slows. both apartment and terraced and Sentiment levels, however, detached housing, than for existing property. Sentiment within the new terraced and detached remain well underpinned by housing sector were particularly strong in Auckland and Wellington, generating net positive scores of 63.4% and 63.2% respectively. the market’s strong performance. Looking to the short-term future, confidence levels are likely to moderate as the impact of the new colliers.co.nz regulatory backdrop is assessed and value growth slows. Sentiment levels, however, remain well underpinned by the market’s strong performance.
New Zealand Key Economic Indicators – July 2021
GDP Current Account (% of GDP) Retail Sales (ex-auto) Net Migration Change (000's)
Mar-21 Dec-20 Q-o-Q (vs. previous quarter) Change (vs. previous quarter) Mar-21 Vs Mar-20 Mar-20 vs. Mar-19
Y-o-Y Change
March Quarter 2022F 2023F 2024F 1.6% -1.0% 2.6% 2.4% 0.0% 2.4% 2.8% 3.4% 3.8% NA NA NA -2.2% -2.8% 0.6% -8.7% -9.5% -10.4% 2.5% -1.8% 4.3% 7.0% 4.0% 3.0% 7.0% 3.8% 4.6% 4 35 -30 4 90 -86% 2 10 19
CPI Inflation
Unemployment Rate
Tourist Numbers Growth Jun-21 Mar-21 Q-o-Q Change Average Year To Y-o-Y Jun-21 Jun-20 Change
March Quarter 2022F 2022F 2023F 0.8% 0.8% 0.0% 2.9% 1.5% 1.4% 2.9% 1.9% 2.0%
4.3% 4.7% -0.4% 4.3% 4.0% 0.3% 4.0% 3.6% 3.6%
May-21 Apr-21 M-o-M Change May-20 (yr rate)
Y-o-Y Change 10 Year Average
March Quarter 2022F 2023F 2024F 2531.6% 2531.6 80.4% -98.9% 2630.5% -12.2% -57.9% -0.2% 10.5%
Official Cash Rate 90 Day Bank Bill Rate 10 Year Government Bond Floating Mortgage Rate 3 Year Fixed Housing Rate Consumer Confidence NZD vs: US UK Australia
Japan Euro Jul-21 Jun-21 M-o-M Change May-20 Y-o-Y 10 -Year
March Change Average 2022F 2023F 2024F 0.25% 0.25% 0 bps 0.3% 0 bps 1.91% 0.5% 1.0% 1.5% 0.40% 0.30% 7 bps 0.3% 10 bps 2.10% 0.6% 1.0% 1.6% 1.8% 1.7% 13 bps 0.6% 117 bps 2.9% 1.5% 1.9% 2.1% 0.04% 0.04% -1 bps 4.5% -13 bps 5.7% 4.5% 4.5% 4.5% 3.4% 3.4% 2 bps 4.1% -69 bps 5.4% NA NA NA 114 115 -1% 97 17% 119 NA NA NA
0.73 0.72 1% 0.61 20% 0.73 0.69 0.67 0.66 0.53 0.52 0% 0.49 6% 0.51 0.50 0.47 0.45 0.93 0.93 0% 0.93 -1% 0.90 0.90 0.88 0.86 76 76 0% 65 17% 76 71 71 71 0.59 0.60 0% 0.56 7% 0.61 0.61 0.63 0.65
