KEY POINTS:
Listed property's growth is being paralysed by a "fire hydrant" of capital flowing across the Tasman from Australian investors and superannuation funds with a stronger appetite for risk, says Patrick Fontein, a major private developer and former Auckland president of the Property Council.
Fontein said the listed sector's chances of growing were being strangled. More audacious Australian investors were buying properties, depriving New Zealand investors of the higher returns which came with higher risks.
He cited the institutional outcry last month against ING Property Trust's plans to spread out of New Zealand into buying Japanese property as the most recent example of investor resistance to taking risks. The objection was so strong that it forced ING to back down.
Kiwi Income Property Trust's $300 million-plus Sylvia Park development was another example earlier this decade because the project met with such a torrent of abuse and investor opposition.
Fontein said instead of starting value-enhancing development activities, the listed property sector was relying mainly on developing more buildings on sites they already owned and reaping big revaluation gains to push up portfolio value.
"The Australians are playing by a different set of rules, gazumping the New Zealanders." He called for a wider discussion on a major structural change to the listed sector, saying most Australian-listed property entities were stapled securities where the interests of the managers and investors were aligned.
"We must change the format. If we don't, we will continue to lose market share to international competitors," said Fontein, who is developing residential property at Orewa and Taupo worth about $600 million.
