New Zealand continues to enjoy relative freedom with Covid-19. The virus remains largely under control and the beginning of the vaccine roll out to the public is a positive thing. Travel bubbles have opened up with Australia and The Cook Islands providing some economic relief principally to the tourist dominant provinces.The government does however seem hell bent on constraining “the haves”, with the introduction of new rules affecting residential investors (namely the Brightline extension and non deductibility of interest) and the increase in the top marginal tax rate to 39%.There have been some encouraging economic indicators, with unemployment lower than forecast, resulting in a very tight labour market. Inflation looks like the dark cloud on the horizon, fueled by increased labour costs (a flow on from the minimum wage increase to $20/hour) and major supply chain issues adversely effecting both landed costs and delivery timeframes. Commercial Real Estate remains in strong demand with the interest rate environment remaining very constant in recent months. This continues to fuel both investor and owner occupier demand. Some sales results have set new record low capitalization rates, reflective also of the on-going supply shortage. Industrial land sales have been particularly strong in the last six months also, to the point where we now have a real shortage of sites both in and around Hamilton currently zoned industrial and ready for sale.On the flip side, leasing has been a mixed bag. Industrial is again leading the way and still has a low vacancy rate. The office sector has generally been much slower. This is a result of an oversupply of CBD options, particularly in the lesser grade offering, and a change in business practice post Covid. The flexibility of business to allow employees to work from home is decreasing the foot print that businesses now require. This could in turn have an adverse effect on rental rates. There has been little change in the retail sector with the CBD suffering but continuation of the good uptake on suburban retail
Did you know - from July 1st the law will change for non residential sales with a value in excess of $1M. The law change mandates the stipulation of Purchase Price Allocation, namely an apportionment of values for land, buildings and fitout/chattels. The allocations must be the greater of book value or market and will be binding on both vendors and purchasers. It is recommended these values be determined at the time of contract, but the new law prescribes the process for determining Purchase Price Allocations if the are not determined at the time of contract. We would encourage all vendors to obtain accounting advice on this at the time of listing your property.
Contact us for more details