A recovering economy, low inflation and low interest rates are positive signs for the New Zealand property market and its offshore investors.
Adding to the level of interest, international attention focuses on the nation once again this month with the start of the Louis Vuitton Cup, the challenger yacht races for the America's Cup. Major public and private improvement projects have been undertaken to prepare for the event.
The New Zealand economy is on a solid footing. National Bank forecasts for the period until next September indicate annual movement in gross domestic product (GDP) ranging from 2.1 per cent to 3.6 per cent and inflation as measured by the Consumer Price Index from 0.9 per cent to 1.4 per cent.
NZ interest rates are low, at about 6.5 per cent for floating rate and 7.2-7.5 per cent for fixed. All this means high real returns for property investors, according to New Zealand's biggest commercial and industrial agency, Bayleys Real Estate.
'New Zealand property yields [rental income returns on the purchase price] are among the highest obtainable anywhere in the world,' the company claims. The median real income return on Auckland industrial investment property stood at above 10 per cent recently.
The yield gap, or difference between median commercial and industrial yields and the cost of borrowing (measured by using the 90- day bill rate plus a 2 per cent loading) recently was about 3.9 per cent for industrial property and 2.4 per cent for commercial.
