$500m pulled from NZ commercial property in two years

Auckland's CBD. Photo / Colin Taylor

Nearly half a billion dollars of overseas funds has left the investment property market in New Zealand since 2008 as foreign investors come under pressure to sell down assets during the recession.

Research from CB Richard Ellis shows property trusts and other managed funds have been the most prevalent sellers during the past two years.

The research covers office buildings, retail space and industrial space in the investment market.

Other managed funds made up 65 per cent of all properties sold in the first half of this year alone, largely due to the sale of assets by
Australia's Brookfield Multiplex, the report said.

CB Richard Ellis senior director Zoltan Moricz said the results were telling given the scale of foreign investment previously.

During 2006 and 2007 the net inflow of foreign funds into the investment market was nearly half a billion dollars.

The report shows in the first half of this year alone $204 million worth of foreign funds left our shores, largely due to a pull-back from Australian investors.

"It's quite a significant feature of the market because overseas investors were prevalent then (2006 and 2007) and they were immediate drivers of the market in relation to liquidity and pricing," he said.

Moricz said institutions with listed property trusts and other managed funds had been heavy sellers because quite a few of them had been close to - or were breaching - their covenant ceilings.

New Zealand was seen as a peripheral market rather than a core market for many overseas investors, and therefore one which they were prepared to sell out of, Moricz said.

The pressure had not been as severe on private sellers because they were 'more transparent and flexible in some cases', Moricz said.

Private sellers made up 25 per cent of all sellers during the first six months of this year.

The proportion of mortgagee sales remained stable during the same period, making up about 5 per cent of total transactions.

However this number may increase as receivers work through the complexities of some larger holdings and portfolios, CBRE said.

Moricz said greater uncertainty and loss of sentiment around the economic outlook has contributed to a loss of momentum in the investment market.

However he expects the outlook to improve next year.

"By the second half of 2011 the recovery will be more sustained and more engrained."

"At the moment there are still some short-term issues to work through," he said.

Access to credit, pressure to sell, and a lack of confidence were all features of the current market, Moricz said.

However these were hiccups rather than a sign the economy was headed for a double dip recession, he said.