The predictions of most relevance to residential property investors are, in no particular order, as follows:
1. Election year promises
Property could be a major beneficiary from promises made in election year 2017.
Higher levels of government spending are likely to be on the table due to the surpluses achieved in the government books.
Activity catalysts like tax cuts, relief packages and tweaks to infrastructure programmes could be some of the carrots on offer to provide property additional support to underlying fundamentals.
2. Interest rates to rise, but still near record lows
Interest rates will rise from record lows as talk of inflation re-emerges and the cost of debt for the banks start to increase.
A slower rate of yield compression will be the outcome, but the gap between costs and returns remains globally positive in most sectors.
Interest rates near record lows will still be a major driver for purchasers for some time yet.
3. Desperately seeking sales
intentions are sky high, but have only just shown signs of reaching the past cyclical peak of more than 8,000 sales per annum, which was a feat reached back in 2003.
Colliers will be watching intently over 2017 to see if investors can break through this record or fall short – desperately wanting to purchase, but unable to find suitable stock.
4. Residential investors to target exemptions
Expectations are for heightened sales activity in 2017 for off-the-plan apartment and terraced unit sales. These are exempted from the Reserve Bank’s new investor LVR policies.
However, only experienced developers with a good track record holding resource consents and locked in construction costs will be supported by the banks and courted by investors.
Consequently, supply won’t increase enough to satisfy demand.
Rising interest rates may be enough to slow price growth to more long-term, sustainable levels of between 5% to 7% per annum, but achieving that will take some time in main cities and regional growth nodes.
5. Confidence shaken
Colliers December 2016 residential and commercial confidence surveys both show confidence will be down for the year ahead in quake-affected and prone areas. This trend will continue through 2017.
Consequences include a reluctance to invest in those areas for a while - with even more investor and occupier demand concentrated on Waikato, Bay of Plenty and Auckland exacerbating already serious affordability issues.
When it comes to commercial property, Colliers predicted that:
• The industrial property sector will have to balance strong demand with yield levels closing in on the cost of debt.
• Challenges will remain for retail property but, if inflation increases, investors are likely to see higher rents and rising capital values.
• Despite the earthquakes, the hotel sector will benefit from ongoing strong demand and restricted supply – and expansion is likely to be on the cards.
In broader economic terms, Colliers expects that GDP growth will track higher than expected, while the rural and agribusiness sector will see a resurgence.
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