Property investment beats other asset classes

Office space is driving improving commercial property returns, the latest Property Council New Zealand/IPD New Zealand All Property Index returns show.

Monday, September 2nd 2013, 12:00AM

by The Landlord

Office space is driving improving commercial property returns, the latest Property Council New Zealand/IPD New Zealand All Property Index returns show.

They reveal a total return of 12.4% for the year ended June 2013 12.4%. Just over 4% of that was capital growth and 8% was income.

That was an improvement on the last June result of 9.2%.

Returns were driven predominantly by the office sector which is up 1.2%. Total return for CBD offices increased from 11.1% to 14.7%, driven by a 2.3% increase in capital return.

Over the last 12 months, New Zealand Listed Property Vehicles (LPVs) outperformed other asset classes ith an annualised return of 15.9%.

The closest competing asset performance was equities at 14.7%. Over the last five years ending June 2013, direct property returned 5.7%, New Zealand LPVs 8.0%, NZ bonds 9.5% and equities -0.2%.

Anthony De Francesco, of IPD Australia and New Zealand, said it showed that the commercial property market was continuing its post-GFC recovering.

“The ongoing improvement in returns for New Zealand property investment is consistent with strengthening macroeconomic fundamentals, such as employment demand and retail trade. The index results suggest that property investment returns should continue to rise above the long-run average return throughout the remainder of 2013 and into 2014.”

Property Council chief executive Connal Townsend said retail and office property was going from strength to strength. “Looking into total returns, the real performer is in capital growth. All capital returns have increased significantly, recording a combined total of 4.1 per cent – up from 2.5 per cent in the year ending March 2013.”

Relative to the Australian market, New Zealand property is outperforming by 330 bps with a 12.4% total return, compared to 9.1% returns for Australian property.

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