James Group Market Snapshot!
With Summer on the horizon and daylight savings underway, we take some time to reflect on the last 9 months and dive in to the WHY’s behind Commercial Real Estate maintaining its positive trends.
The attractiveness of the Auckland Property investment market we saw in the first 6 months of 2019 has continued throughout Quarter 3, with established full sales pipelines, a solid level of transactions and continuous high levels of enquiry.

In line with the lack of supply, yields are continuing to compress as this record 
low interest rate environment looks set to stay for the foreseeable future. This puts additional pressure on pricing, and with that, the continued optimism held within the Commercial Property Market stays on trend.

Investors are looking for a 
higher return than the more traditional residential investment portfolio offers, and according to an Auckland Commercial Property Market report, the average return on investment (ROI) for commercial properties (excluding property rates, property management fees, and other costs) is between 5-5.5%, whereas the ROI for residential properties is 3% on average.

With Government legislation putting a stronghold on the residential sector over the past 2 years, this is pushing out some investors towards the higher yields on offer in commercial property. Combine that with higher rents and lower maintenance and commercial property makes for an interesting proposition.



Upcoming Trends 
We are noticing more interest arise towards property syndication, which is a type of proportionate ownership structure whereby numerous investors pool their capital to increase purchasing power & invest in Commercial Property. The minimum investment generally starts at $50,000, with cash on cash returns starting from  6% per year. This of course varies case by case, however, for investors with limited capital, this does provide a higher return than money in the bank and a step into the property investment arena.


OCR

The OCR has strong influence on the cost of funding with the flip side of that being the rate for money held in the bank being not as favourable for long term financial gains.  The much talked about loan to value restrictions on residential loans have also made commercial property more appealing, by bringing borrowing in line with commercial leverage in many cases. A heady combo when looking at the bigger picture.



YPIRE Conference 2019 Panellist
A few of the JG team had a great day out at the REINZ 2019 YPIRE Conference! Great activities and fantastic speakers including one of our own, Jordan Palmer. Jordan shared his experience being a young professional in Real Estate during a live panel Q & A!



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