Commercial survey respondents unhappy

The golden run of the industrial property sector appears to have some mileage in it over the coming 12 months. Photo / Supplied

Responses to a new commercial property survey rank 'general economic growth' as being of concern, followed by interest rate increases, and a dearth of commercial and industrial stock to buy.

More than 50 per cent of respondents in a commercial property Sentiment Survey, conducted by real estate agency Bayleys, indicated they were unhappy with the Government's lack of decisive leadership during its first seven months in power.

The survey, based on responses from 5700 New Zealanders with commercial and industrial property interests, revealed that the Government's perceived lack of focus on 'wealth creation' through commercial property ownership and development was a worry for those with a financial stake in the industry.

"Respondents indicated that the Government's policies were still unclear, and that there needs to be clear decision-making around infrastructure and future-proofing New Zealand's transport network," said Ian Little, Bayleys Research manager.

"There was also a call from survey respondents for more implementation of processes that would raise productivity."

By segment type, the industrial property sector's golden run in recent years still appears to have some mileage in it over the coming 12 months, according to two-thirds of survey respondents.

Little says Bayleys' Research data dovetails with the Reserve Bank of New Zealand's November 2017 Financial Stability Risk and Policy Assessment (FSR) – which reported that commercial property prices had increased strongly over the past three years.

"The RBNZ reported that credit growth to the sector has been relatively strong – with commercial property lending accounting for around eight per cent of total bank lending," says Little.

He says RBNZ monitors show risks in the sector appear to be relatively well-contained over recent years - with New Zealand commercial property prices increasing at a faster rate than in many other countries - automatically increasing equity levels.

"The FSR report noted that the strength of New Zealand's economy has increased owner-occupier and investor demand for commercial property - consequently supporting capital growth.

"The RBNZ's Credit Conditions Survey also published at the end of last year pointed to a further tightening of lending standards for commercial property, saying this was a judicious response to heightened risks in the property development sector."

Little says the Reserve Bank's cautionary 'taking a breather analogy' mirrors sentiment coming from some of the retail banks in assessing lending criteria.

Ian Little, Bayleys Research.