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New Zealand Research Report | October 2019 | Colliers International Research1
October 2019
Dwelling demand overstated?
Resident Population – Census 2018 versus Estimates 2018 estimates
Source: StatsNZ, Colliers International Research
1
RegionCensus 2013
resident population
Census 2018
resident
population
StatsNZ June 2018
estimates
Difference
between 2018
estimate and
Census 2018 (no.)
Difference
between 2018
estimate and
Census 2018 (%)
Northland 151,689 179,076 179,100 -24 0%
Auckland 1,415,550 1,571,718 1,695,900 -124,182 -7%
Waikato 403,641 458,202 468,800 -10,598 -2%
Bay of Plenty 267,741 308,499 305,700 2,799 1%
Gisborne 43,653 47,517 49,100 -1,583 -3%
Haw ke's Bay 151,179 166,368 165,900 468 0%
Taranaki 109,608 117,561 119,600 -2,039 -2%
Manaw atu-Wanganui 222,672 238,797 243,700 -4,903 -2%
Wellington 471,315 506,814 521,500 -14,686 -3%
Tasman 47,157 52,389 52,100 289 1%
Nelson 46,437 50,880 51,900 -1,020 -2%
Marlborough 43,416 47,340 46,600 740 2%
West Coast 32,148 31,575 32,600 -1,025 -3%
Canterbury 539,433 599,694 624,000 -24,306 -4%
Otago 202,470 225,186 229,200 -4,014 -2%
Southland 93,342 97,467 99,100 -1,633 -2%
Total 4,241,451 4,699,083 4,884,800 -185,717 -4%
Latest Census results show we may need 69,000
fewer homes nationally than expected due to
previous 2018 population estimates that have turned
out to be bullish. This has some impacts on the
balance between residential demand and supply
looking forward.
A selection of the Census 2018 data was released
recently showing population growth of 11% (2% p.a.)
nationally between the two censuses, up from 4.24
million people in 2013 to 4.70 million people in 2018.
While an increase of around 457,500 people is a
solid result, Statistics NZ’s June 2018 provisional
population estimates predicted the increase would
be 643,500 people, around 186,000 people more.
The higher estimated growth in numbers some may
have used in the absence of Census results, very
simply indicated an additional 238,000 homes were
needed to house our new residents at the average
household size of 2.7 people per home (2018
average yet to be released). However, the new
Census data suggests this shortfall may be too high.
Resident population growth between the Census
2013 and Census 2018 indicates the requirement for
169,000 homes, approximately 69,000 fewer homes.
Using residential building consents as a proxy for
supply (which doesn’t necessarily represent what is
delivered or take into consideration the reduction in
stock due to the demolition of existing premises),
around 120,000 consents were issued in the five
years to June 2018.
Therefore, simplistically, the potential shortfall of
homes for the rise in resident population between
2013 and 2018 of around 118,000 homes under the
2018 population estimates, is only 49,000 under the
new Census 2018 results. A shortfall remains.
Looking at the same information for the Auckland
region, the 2018 population estimates overstated the
Census 2018 total by 124,000 people with growth of
156,000 people instead of 280,000 people. At an
average household size of 2.9 people in Auckland,
this reduces the demand for additional homes from
97,000 to 54,000 between 2013 and 2018.
New Zealand Research Report | October 2019 | Colliers International ResearchNew Zealand Research Report | September 2019 | Colliers International Research
Source: NZIER, Colliers International Research
*March year forecast
2
In the five years to June 2018, residential consents
totalled 41,000 in Auckland, indicating simplistically
a potential shortfall of 56,000 homes under the 2018
population estimates or just 13,000 under the new
Census 2018 results. Still a shortfall, just not as
large.
Other regions around New Zealand also faced
higher population estimates compared to Census
2018 results, with the exception being Bay of Plenty,
Hawke’s Bay, Tasman and Marlborough. Population
estimates were understated in these regions.
However, these figures should not be taken at face
value. Demand and supply balances calculated
through broad regional population changes and
residential consent issuance provide only a fraction
of the real drivers of overall market conditions.
There are a number of other underlying reasons on
why particular development and purchasing
hotspots occur such as credit availability, residential
tenure, unoccupied home rates, non-resident stock,
entry constraints, infrastructure provision, quality of
the property, desirability of the location and what
happens at a more local catchment level for
example. There has also been a number of
questions regarding the validity of the Census 2018
data given the poor response rate.
Indicative Commercial Lending Rates
What the results do mean is that developers and
purchasers need to be cautious, confident and
prudent with their due diligence, completing a
thorough assessment of market dynamics that relate
to their specific project or purchasing opportunity.
Relying on broad datasets without access to specific
data, market insights and local intel could lead to
future disappointments.
Commercial Interest Rate Guide
Date3 Year Term
(Indicative Borrowing Rate)
Mar-19 4.47%
Apr-19 4.15%
May-19 4.06%
Jun-19 4.51%
Jul-19 4.41%
Aug-19 4.30%
Sep-19 3.95%
Oct-19 3.90%
Source: ANZ, Colliers International Research
Note: the lending rate quoted in the table is not necessarily what
you will be offered, and should be regarded as indicating
medium term trends.
New Zealand Key Economic Indicators – October 2019
Mar-19
(yr rate)
Mar-19
(qtr rate)
Dec-18
(qtr rate)
Q-o-Q
Change
Mar-18
(yr rate)
Y-o-Y
Change 2020F* 2021F* 2022F*
GDP Growth 2.5% 0.6% 0.6% -0.1% 3.1% -0.6% 2.3% 2.5% 2.5%
Current Account (% of GDP) -3.6% NA NA NA -3.0% -0.6% -2.3% -3.7% -3.7%
Jun-19
(yr rate)
Jun-19
(qtr rate)
Mar-19
(qtr rate)
Q-o-Q
Change
Jun-18
(yr rate)
Y-o-Y
Change 2020F* 2021F* 2022F*
CPI Inflation 1.7% 0.6% 0.1% 0.5% 1.5% 0.2% 1.4% 1.7% 1.7%
Net Migration Gain (000's) 49 11 13 -2 49 1 35 24 24
Retail Sales (ex-auto) 3.9% 0.7% 0.2% 0.4% 4.3% -0.5% 3.6% 4.6% 4.6%
Unemployment Rate 4.1% 3.9% 4.2% -0.3% 4.5% -0.4% 3.9% 3.9% 3.9%
Jun-19
(yr rate)
May-19
(yr rate)
M-o-M
Change
Jun-18
(yr rate)
Y-o-Y
Change
10 Year
Average2020F* 2021F* 2022F*
Tourist Numbers Growth 1.3% 1.3% -0.2% 5.3% -3.9% 4.8% 4.5% 4.0% 4.7%
Floating Mortgage Rate 5.7% 5.7% 0 bps 5.9% -12 bps 6.0% 5.0% 4.9% 4.9%
3 Year Fixed Housing Rate 4.7% 4.7% -1 bps 5.3% -56 bps 6.1% NA NA NA
Aug-19
(yr rate)
Jul-19
(yr rate)
M-o-M
Change
Aug-18
(yr rate)
Y-o-Y
Change
10 Year
Average2020F* 2021F* 2022F*
Official Cash Rate 1.00% 1.50% -50 bps 1.8% -75 bps 2.33% 0.75% 0.75% 0.75%
90 Day Bank Bill Rate 1.3% 1.6% -30 bps 1.9% -66 bps 2.5% 1.0% 0.9% 0.9%
10 Year Government Bond 1.1% 1.6% -42 bps 2.6% -151 bps 3.5% 2.3% 2.4% 2.4%
Consumer Confidence 118 116 2% 118 1% 120 NA NA NA
NZD vs US 0.64 0.67 -4% 0.67 -4% 0.75 0.65 0.65 0.65
NZD vs UK 0.53 0.54 -1% 0.52 2% 0.50 0.49 0.47 0.47
NZD vs Australia 0.95 0.96 -1% 0.91 4% 0.87 0.89 0.86 0.86
NZD vs Japan 68 72 -5% 74 -8% 75 73 73 73
NZD vs Euro 0.58 0.60 -3% 0.58 0% 0.60 0.60 0.62 0.62
New Zealand Research Report | October 2019 | Colliers International Research
2.4%
4.0%3.5%
3.0%3.8%4.8% 8.0% 3.5%
5.9%6.4%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
OfficeColliers International’s 1H 2019 global survey covering over
150 cities, indicates sustained rental growth in the global office
market.
Hong Kong maintained it’s first position as the most expensive
office space to lease in the world at NZD$3,708 per sqm,
double London – West End at NZD$1,841 per sqm. Sydney
ranked amongst the top 10, commanding rents above $1,000
per sqm. Whilst Auckland’s and Wellington’s rents continue to
grow, their global rankings have decreased due to exchange
rates as well as other markets experiencing higher rental
growth rates in strong market conditions.
In regards to investment activity, Hong Kong also recorded the
firmest yield at 2.4% Excluding Delhi-NCR, the top 10 cities
with the highest rents have an average yield of 3.5%. In New
Zealand, Auckland and Wellington yields have continued to
firm. In the first half of this year, Auckland average prime
yields firmed 40 basis points to 5.9% and Wellington 20 basis
points to 6.4%, a combined average of 6.2% compared to last
year’s 6.5%.
IndustrialHong Kong remained in first place for the highest industrial
rents in the Colliers International global survey. Average prime
warehouse net rents of NZD$463 per sqm are also up from
NZD$400 per sqm a year ago. San Francisco Peninsula
remained in second position with net rents of NZD$399 per
sqm. Auckland has jumped up four positions, now ranking
52nd, with an average prime warehouse net rent of NZD$134
per sqm, up from NZD$124 per sqm a year ago. While
exchange rates impacted our results, Auckland’s strong
industrial sector performance driven by record low vacancy
rates, growing tenant demand and the low development
pipeline has generated strong rental growth rates.
Average prime yields from the worlds’ top 10 performers range
from 3.5 percent to 6.0 percent. While yields have been
firming throughout the country, only Auckland property is
within this range, indicating potential room for growth in both
Wellington and Christchurch.
RetailThe Large Format Retail sector is expanding progressively
throughout New Zealand. LFR currently accounts for just over
one-third of nationwide retail developments Colliers
International tracks of 2,000 sqm and over. Retailers have
continued to perform well, providing stable rental cash flow.
Data from Stats NZ suggests retail spending for hardware,
building and garden supply retailers has increased by 42.2
percent in the last five years, while spending at department
stores has increased 17.0 percent.
The land extensive nature of the properties has delivered
value appreciation, especially in a low-interest rate
environment that is spurring investment activity.
3
Source: StatsNZ, Colliers International Research
*Based on USD/NZD conversion rate of 1.49
Source: Colliers International Research
Sales and Stocks by Industry – Year to March
Colliers Global Industrial Survey – Average Prime
Warehouse Net Rents ($NZD) and Yields (%)
Colliers Global Office Survey – Average Prime CBD
Office Rents ($NZD) and Yields (%)
3.5%
4.0%
4.0%
4.8%6.0% 4.8% 5.0%
5.0%7.1% 6.4%
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
*Based on USD/NZD conversion rate of 1.49
Source: Colliers International Research
0
2,000
4,000
6,000
8,000
10,000
2014 2015 2016 2017 2018 2019
Op
era
tin
g I
nco
me (
$,M
illio
ns)
Specialised food retailing (excluding liquor)Liquor retailingDepartment storesFurniture, floor coverings, houseware and textile goods retailingHardware, building and garden suppliesRecreational goods retailingClothing, footwear and personal accessory retailingElectrical and electronic goods retailingPharmaceutical and other store based retailing
New Zealand Research Report | October 2019 | Colliers International ResearchNew Zealand Research Report | September 2019 | Colliers International Research
Source: Colliers International Research
*Combination of industrial office & warehouse at a ratio of 20:80.
4
Annual Market Indicator Review – Q2 2019
Recent Commercial Property Sales
Alan McMahon
National Director
Strategic Advisory
David White
Director
Strategic Advisory
For more information contact:
Chris Dibble
Director
Research & Communications
Adrian Goh
Research Analyst
Anna Sizova
Research Analyst
Emily Duncan
Research Analyst
Disclaimer: Whilst all care has been taken to provide reasonably accurate information, Colliers International cannot guarantee the validity of all data and
information utilised in preparing this research. Accordingly Colliers International New Zealand Ltd, do not make any representation of warranty, expressed
or implied, as to the accuracy or completeness of the content contained herein and no legal liability is to be assumed or implied with respect thereto.
© All content is Copyright Colliers International New Zealand Ltd, Licensed REAA 2008 and may not be reproduced without expressed permission.
Chris Farhi
Director
Strategic Advisory
Caity Pask
Senior Analyst
Strategic Advisory
Vernon Sequeira
Analyst
Strategic Advisory
Colliers International
Level 27, SAP
Tower
151 Queen Street
Auckland
+64 9 358 1888
Property Sector
Prime Rents
(% Change)
Prime Capital Values
(% Change)Vacancy Rate
12-Months to Jun-19 12-Months to Jun-19 2018 2019
Office Net Face Based on Net Face Overall (June)
Auckland CBD 1.5% 6.0% 6.2% 5.0%
Office Gross Face Based on Net Face Overall (June)
Wellington CBD 6.5% 4.3% 7.7% 5.9%
Office Net Face Based on Net Face Overall (March)
Auckland Metropolitan 2.6% 9.8% 6.0% 6.3%
Industrial* Net Face Based on Net Face Overall (February)
Auckland 3.8% 14.1% 2.2% 1.5%
Industrial* Gross Face Based on Net Face Overall (November)
Wellington 7.3% 10.9% 2.1% (2017) 1.5% (2018)
Industrial* Net Face Based on Net Face Overall (September)
Christchurch -0.8% 2.3% 1.9% (2016) N/A
Retail Net Face Based on Net Face Overall (June)
Auckland CBD 0.0% 0.0% 3.8% 5.7%
Retail Gross Face Based on Net Face Overall (June)
Wellington CBD 2.3% 3.5% 6.8% 4.2%
71 Boston Road, Grafton
Auckland | $3,625,000 | 5.4% 66 Wyndham Street, Auckland CBD
Auckland | $144,500,00042,60 & 70 Favona Road, Mangere
Auckland | $29,000,000