We hope everyone had an enjoyable break and been able to enjoy a Kiwi summer reminiscent of that of the 1970’s.It has been another quarter where Covid 19 has continued to make headlines. At long last, with the elimination strategy behind us, the traffic light system does provide for more activity. The threat of hard lockdowns are theoretically behind us. Sadly, it is still the hospitality and the events sectors adversely affected the most.
There has been little change is availability over the last quarter. There is still a severe lack of supply in industrial buildings and land. There is continued capacity in the retail and lesser grade office sectors. There has been a rapid rise in inflation. Annualised CPI is now above 5% due to supply chain issues, evident in petrol and building materials and labour cost rises. The latest unemployment numbers were at 3.2% the lowest since records have been kept. Without immigration this has put serious pressure on employers. Retention of key staff is both critical and expensive with the pressure of higher wages and salaries from competitors. While this has resulted in rising interest rates we also expect it to result in a steady increase in rents. This is particularly evident in the industrial sphere with record rental rates, both for new and existing, have been achieved on the back of the supply shortage and rising cost environment.While there is a risk that rising interest rates with force yields to follow suit (possibly resulting in lower capital values) the increasing rents and rapid rise in land and build costs do provide a natural hedge. In short it is still a good time to be purchasing property if you can get access to it.One of the most significant events of the last quarter has been the introduction of the CCCFA. This Act was recently introduced by the government and became effective December 1st. Designed to promote responsible lending and to clamp down on reckless second tier lenders the Act has become all encompassing. The impact has been two-fold. Firstly, is has had a detrimental effect on the availability of funds with the banks more heavily scrutinizing customers “bankability” and spending habits. The second impact has been on time. Loan applications are taking significantly longer to process because of the more intense analysis required. This is impacting on conditional periods and settlements. While the hope is there will be some relaxing of the rules expect this to have further impact in the quarter ahead.If you are looking for a rental or capital value appraisal for your property, then please contact your preferred Lodge Commercial agent. We are happy to assist you to ensure you remain current with the latest data and trends.
Lodge Commercial agents