Chinese investors to be encouraged

John Church.

Chinese investment in New Zealand property has become controversial "but we can't have it both ways -- expecting the Chinese to pay for our increased prosperity yet putting more barriers around their investment in New Zealand", says John Church, commercial and industrial general manager for Bayleys Real Estate.

In Bayleys' Total Property magazine, Church says Chinese property investment is "fairly narrowly focused. The Chinese are most interested in uncomplicated properties, predominantly land or high value, high quality investment opportunities. They are not -- as some New Zealand property owners wrongly perceive -- interested in paying a premium for average offerings.

"They are particularly interested in the Auckland and Christchurch land sales market at present where they see big opportunities to add value. They have the capital and expertise in intensive residential development to help Auckland solve its affordable housing shortage.

"They will also be on-selling what they create to New Zealanders, many of whom will be first home buyers. So it's hard to see why we wouldn't be encouraging that type of investment."

Church says that at present Chinese foreign direct investment (FDI) represents around only 5 per cent of total FDI in New Zealand. "However, that is likely to grow as the result of the move to direct convertibility of the New Zealand and Chinese currencies earlier this year coupled with the radical transformation of the financial system being proposed by the Chinese Government. This is likely to release what one economic commentator has described as a 'torrent' of capital into markets around the world.

"Recent trips to China by Bayleys personnel have reinforced just how significant that new wave of investment might be," says Church.

Church says offshore Asian investors are unlikely to become significant players in the most active segment of the New Zealand commercial and industrial property market, sub $5 million sales, which will remain the preserve of local investors. "These investors include a variety of ethnic groups, including local Chinese, Korean and Indians, but they are for the most part New Zealand citizens. They reflect the increasingly multicultural society that we live in and have added a depth of buyers to the market which property sellers have benefited from."

At the higher value end of the market, offshore investors are competing with institutional investors, high net worth private New Zealand investors and the growing presence of iwi investing substantial portions of their treaty settlements in commercial property.

Church says there is now a strong economic connection between China and New Zealand.

"China is now New Zealand's biggest export market, accounting for close to a quarter of the revenue we generate from sending goods offshore. The 51 per cent increase in exports to China in the March 2014 year is largely responsible for a trade surplus that makes New Zealand one of the strongest performing economies in the world at present," he says.

Southeast Asian investment activity has been a feature of the New Zealand property market since the late 1980s but the growing involvement of investors from China, as a result of the expansion and liberalisation of that country's economy, has been the most significant changing dynamic of foreign investment over the last few years.

"We have built up a substantial database of Southeast Asian investors over the last 25 years or so but what has been particularly noticeable to us recently has been the emergence of new investment interest.

"Much of this is from very serious players in the Chinese property market."