Compulsory super drives Aussie interest in NZ

By Suzanne Green

Friday 9th August 2002

Australia is leading the way in offshore interest in New Zealand commercial property.

After a marketing trip to Australia, Hong Kong and Singapore, Wellington-based Bill Leckie of Colliers International said there had been a steady stream of interest from offshore investors.

With previous visits, while institutions and trusts had been willing to look at what was on offer, there was always the feeling all information promptly went into the bin as soon as the visit was over, Mr Leckie said.

"However, on this occasion they were keen to see us and there was a definite interest in New Zealand."

Compulsory superannuation in Australia, with part of the funds invested in property, was the main driver behind the property search in New Zealand.

Until the end of June compulsory savings of 6% were required and from July this increased to 9%.

"Basically all these funds are chasing a similar type of property which has driven prices up and yields down," Mr Leckie said.

"There's simply not enough investment stock in Australia to deal with these ever-increasing volumes of funds."

Yields for central business district property in Sydney and Melbourne were in the vicinity of 5-6%.

The general sentiment was the Australian market had peaked so with any property bought now the capital investment could drop quite rapidly, Mr Leckie said.

The cost of buying was also quite high with stamp duty of 5-6%, he said.

"Typically, these funds are buying property in excess of $100 million so they're paying $6 million plus due diligence costs which amount to hundreds of thousands of dollars," he said.

Another reason they were looking at New Zealand was the gap between the dollars was seen as favourable to Australians.

"They feel as though they're buying at a discount.

A New Zealand central business district highrise could be bought in the range of 9-10%, giving a margin of 4-5%, Mr Leckie said.

Wellington had a clearly defined CBD underpinned by the government, which occupied about 30% of office stock.

Singapore and Hong Kong were a bit different.

Both markets were depressed.

A lot of Singapore investors had put money into New Zealand in the early 1990s and had lost it.

They bought over-rented, over-yielded properties.

However, they were still keen to keep funds here and remained active in the market.

They were more educated and more discerning about what they bought.

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