1 Census 2018 (no.) Census 2018 (%) population Auckland … · 2019-12-10 · why particular development and purchasing hotspots occur such as credit availability, residential tenure,

New Zealand Research Report | October 2019 | Colliers International Research1

October 2019

Dwelling demand overstated?

Resident Population – Census 2018 versus Estimates 2018 estimates

Source: StatsNZ, Colliers International Research

1

RegionCensus 2013

resident population

Census 2018

resident

population

StatsNZ June 2018

estimates

Difference

between 2018

estimate and

Census 2018 (no.)

Difference

between 2018

estimate and

Census 2018 (%)

Northland 151,689 179,076 179,100 -24 0%

Auckland 1,415,550 1,571,718 1,695,900 -124,182 -7%

Waikato 403,641 458,202 468,800 -10,598 -2%

Bay of Plenty 267,741 308,499 305,700 2,799 1%

Gisborne 43,653 47,517 49,100 -1,583 -3%

Haw ke's Bay 151,179 166,368 165,900 468 0%

Taranaki 109,608 117,561 119,600 -2,039 -2%

Manaw atu-Wanganui 222,672 238,797 243,700 -4,903 -2%

Wellington 471,315 506,814 521,500 -14,686 -3%

Tasman 47,157 52,389 52,100 289 1%

Nelson 46,437 50,880 51,900 -1,020 -2%

Marlborough 43,416 47,340 46,600 740 2%

West Coast 32,148 31,575 32,600 -1,025 -3%

Canterbury 539,433 599,694 624,000 -24,306 -4%

Otago 202,470 225,186 229,200 -4,014 -2%

Southland 93,342 97,467 99,100 -1,633 -2%

Total 4,241,451 4,699,083 4,884,800 -185,717 -4%

Latest Census results show we may need 69,000

fewer homes nationally than expected due to

previous 2018 population estimates that have turned

out to be bullish. This has some impacts on the

balance between residential demand and supply

looking forward.

A selection of the Census 2018 data was released

recently showing population growth of 11% (2% p.a.)

nationally between the two censuses, up from 4.24

million people in 2013 to 4.70 million people in 2018.

While an increase of around 457,500 people is a

solid result, Statistics NZ’s June 2018 provisional

population estimates predicted the increase would

be 643,500 people, around 186,000 people more.

The higher estimated growth in numbers some may

have used in the absence of Census results, very

simply indicated an additional 238,000 homes were

needed to house our new residents at the average

household size of 2.7 people per home (2018

average yet to be released). However, the new

Census data suggests this shortfall may be too high.

Resident population growth between the Census

2013 and Census 2018 indicates the requirement for

169,000 homes, approximately 69,000 fewer homes.

Using residential building consents as a proxy for

supply (which doesn’t necessarily represent what is

delivered or take into consideration the reduction in

stock due to the demolition of existing premises),

around 120,000 consents were issued in the five

years to June 2018.

Therefore, simplistically, the potential shortfall of

homes for the rise in resident population between

2013 and 2018 of around 118,000 homes under the

2018 population estimates, is only 49,000 under the

new Census 2018 results. A shortfall remains.

Looking at the same information for the Auckland

region, the 2018 population estimates overstated the

Census 2018 total by 124,000 people with growth of

156,000 people instead of 280,000 people. At an

average household size of 2.9 people in Auckland,

this reduces the demand for additional homes from

97,000 to 54,000 between 2013 and 2018.

New Zealand Research Report | October 2019 | Colliers International ResearchNew Zealand Research Report | September 2019 | Colliers International Research

Source: NZIER, Colliers International Research

*March year forecast

2

In the five years to June 2018, residential consents

totalled 41,000 in Auckland, indicating simplistically

a potential shortfall of 56,000 homes under the 2018

population estimates or just 13,000 under the new

Census 2018 results. Still a shortfall, just not as

large.

Other regions around New Zealand also faced

higher population estimates compared to Census

2018 results, with the exception being Bay of Plenty,

Hawke’s Bay, Tasman and Marlborough. Population

estimates were understated in these regions.

However, these figures should not be taken at face

value. Demand and supply balances calculated

through broad regional population changes and

residential consent issuance provide only a fraction

of the real drivers of overall market conditions.

There are a number of other underlying reasons on

why particular development and purchasing

hotspots occur such as credit availability, residential

tenure, unoccupied home rates, non-resident stock,

entry constraints, infrastructure provision, quality of

the property, desirability of the location and what

happens at a more local catchment level for

example. There has also been a number of

questions regarding the validity of the Census 2018

data given the poor response rate.

Indicative Commercial Lending Rates

What the results do mean is that developers and

purchasers need to be cautious, confident and

prudent with their due diligence, completing a

thorough assessment of market dynamics that relate

to their specific project or purchasing opportunity.

Relying on broad datasets without access to specific

data, market insights and local intel could lead to

future disappointments.

Commercial Interest Rate Guide

Date3 Year Term

(Indicative Borrowing Rate)

Mar-19 4.47%

Apr-19 4.15%

May-19 4.06%

Jun-19 4.51%

Jul-19 4.41%

Aug-19 4.30%

Sep-19 3.95%

Oct-19 3.90%

Source: ANZ, Colliers International Research

Note: the lending rate quoted in the table is not necessarily what

you will be offered, and should be regarded as indicating

medium term trends.

New Zealand Key Economic Indicators – October 2019

Mar-19

(yr rate)

Mar-19

(qtr rate)

Dec-18

(qtr rate)

Q-o-Q

Change

Mar-18

(yr rate)

Y-o-Y

Change 2020F* 2021F* 2022F*

GDP Growth 2.5% 0.6% 0.6% -0.1% 3.1% -0.6% 2.3% 2.5% 2.5%

Current Account (% of GDP) -3.6% NA NA NA -3.0% -0.6% -2.3% -3.7% -3.7%

Jun-19

(yr rate)

Jun-19

(qtr rate)

Mar-19

(qtr rate)

Q-o-Q

Change

Jun-18

(yr rate)

Y-o-Y

Change 2020F* 2021F* 2022F*

CPI Inflation 1.7% 0.6% 0.1% 0.5% 1.5% 0.2% 1.4% 1.7% 1.7%

Net Migration Gain (000's) 49 11 13 -2 49 1 35 24 24

Retail Sales (ex-auto) 3.9% 0.7% 0.2% 0.4% 4.3% -0.5% 3.6% 4.6% 4.6%

Unemployment Rate 4.1% 3.9% 4.2% -0.3% 4.5% -0.4% 3.9% 3.9% 3.9%

Jun-19

(yr rate)

May-19

(yr rate)

M-o-M

Change

Jun-18

(yr rate)

Y-o-Y

Change

10 Year

Average2020F* 2021F* 2022F*

Tourist Numbers Growth 1.3% 1.3% -0.2% 5.3% -3.9% 4.8% 4.5% 4.0% 4.7%

Floating Mortgage Rate 5.7% 5.7% 0 bps 5.9% -12 bps 6.0% 5.0% 4.9% 4.9%

3 Year Fixed Housing Rate 4.7% 4.7% -1 bps 5.3% -56 bps 6.1% NA NA NA

Aug-19

(yr rate)

Jul-19

(yr rate)

M-o-M

Change

Aug-18

(yr rate)

Y-o-Y

Change

10 Year

Average2020F* 2021F* 2022F*

Official Cash Rate 1.00% 1.50% -50 bps 1.8% -75 bps 2.33% 0.75% 0.75% 0.75%

90 Day Bank Bill Rate 1.3% 1.6% -30 bps 1.9% -66 bps 2.5% 1.0% 0.9% 0.9%

10 Year Government Bond 1.1% 1.6% -42 bps 2.6% -151 bps 3.5% 2.3% 2.4% 2.4%

Consumer Confidence 118 116 2% 118 1% 120 NA NA NA

NZD vs US 0.64 0.67 -4% 0.67 -4% 0.75 0.65 0.65 0.65

NZD vs UK 0.53 0.54 -1% 0.52 2% 0.50 0.49 0.47 0.47

NZD vs Australia 0.95 0.96 -1% 0.91 4% 0.87 0.89 0.86 0.86

NZD vs Japan 68 72 -5% 74 -8% 75 73 73 73

NZD vs Euro 0.58 0.60 -3% 0.58 0% 0.60 0.60 0.62 0.62

New Zealand Research Report | October 2019 | Colliers International Research

2.4%

4.0%3.5%

3.0%3.8%4.8% 8.0% 3.5%

5.9%6.4%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

OfficeColliers International’s 1H 2019 global survey covering over

150 cities, indicates sustained rental growth in the global office

market.

Hong Kong maintained it’s first position as the most expensive

office space to lease in the world at NZD$3,708 per sqm,

double London – West End at NZD$1,841 per sqm. Sydney

ranked amongst the top 10, commanding rents above $1,000

per sqm. Whilst Auckland’s and Wellington’s rents continue to

grow, their global rankings have decreased due to exchange

rates as well as other markets experiencing higher rental

growth rates in strong market conditions.

In regards to investment activity, Hong Kong also recorded the

firmest yield at 2.4% Excluding Delhi-NCR, the top 10 cities

with the highest rents have an average yield of 3.5%. In New

Zealand, Auckland and Wellington yields have continued to

firm. In the first half of this year, Auckland average prime

yields firmed 40 basis points to 5.9% and Wellington 20 basis

points to 6.4%, a combined average of 6.2% compared to last

year’s 6.5%.

IndustrialHong Kong remained in first place for the highest industrial

rents in the Colliers International global survey. Average prime

warehouse net rents of NZD$463 per sqm are also up from

NZD$400 per sqm a year ago. San Francisco Peninsula

remained in second position with net rents of NZD$399 per

sqm. Auckland has jumped up four positions, now ranking

52nd, with an average prime warehouse net rent of NZD$134

per sqm, up from NZD$124 per sqm a year ago. While

exchange rates impacted our results, Auckland’s strong

industrial sector performance driven by record low vacancy

rates, growing tenant demand and the low development

pipeline has generated strong rental growth rates.

Average prime yields from the worlds’ top 10 performers range

from 3.5 percent to 6.0 percent. While yields have been

firming throughout the country, only Auckland property is

within this range, indicating potential room for growth in both

Wellington and Christchurch.

RetailThe Large Format Retail sector is expanding progressively

throughout New Zealand. LFR currently accounts for just over

one-third of nationwide retail developments Colliers

International tracks of 2,000 sqm and over. Retailers have

continued to perform well, providing stable rental cash flow.

Data from Stats NZ suggests retail spending for hardware,

building and garden supply retailers has increased by 42.2

percent in the last five years, while spending at department

stores has increased 17.0 percent.

The land extensive nature of the properties has delivered

value appreciation, especially in a low-interest rate

environment that is spurring investment activity.

3

Source: StatsNZ, Colliers International Research

*Based on USD/NZD conversion rate of 1.49

Source: Colliers International Research

Sales and Stocks by Industry – Year to March

Colliers Global Industrial Survey – Average Prime

Warehouse Net Rents ($NZD) and Yields (%)

Colliers Global Office Survey – Average Prime CBD

Office Rents ($NZD) and Yields (%)

3.5%

4.0%

4.0%

4.8%6.0% 4.8% 5.0%

5.0%7.1% 6.4%

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

*Based on USD/NZD conversion rate of 1.49

Source: Colliers International Research

0

2,000

4,000

6,000

8,000

10,000

2014 2015 2016 2017 2018 2019

Op

era

tin

g I

nco

me (

$,M

illio

ns)

Specialised food retailing (excluding liquor)Liquor retailingDepartment storesFurniture, floor coverings, houseware and textile goods retailingHardware, building and garden suppliesRecreational goods retailingClothing, footwear and personal accessory retailingElectrical and electronic goods retailingPharmaceutical and other store based retailing

New Zealand Research Report | October 2019 | Colliers International ResearchNew Zealand Research Report | September 2019 | Colliers International Research

Source: Colliers International Research

*Combination of industrial office & warehouse at a ratio of 20:80.

4

Annual Market Indicator Review – Q2 2019

Recent Commercial Property Sales

Alan McMahon

National Director

Strategic Advisory

David White

Director

Strategic Advisory

For more information contact:

Chris Dibble

Director

Research & Communications

Adrian Goh

Research Analyst

Anna Sizova

Research Analyst

Emily Duncan

Research Analyst

Disclaimer: Whilst all care has been taken to provide reasonably accurate information, Colliers International cannot guarantee the validity of all data and

information utilised in preparing this research. Accordingly Colliers International New Zealand Ltd, do not make any representation of warranty, expressed

or implied, as to the accuracy or completeness of the content contained herein and no legal liability is to be assumed or implied with respect thereto.

© All content is Copyright Colliers International New Zealand Ltd, Licensed REAA 2008 and may not be reproduced without expressed permission.

Chris Farhi

Director

Strategic Advisory

Caity Pask

Senior Analyst

Strategic Advisory

Vernon Sequeira

Analyst

Strategic Advisory

Colliers International

Level 27, SAP

Tower

151 Queen Street

Auckland

+64 9 358 1888

Property Sector

Prime Rents

(% Change)

Prime Capital Values

(% Change)Vacancy Rate

12-Months to Jun-19 12-Months to Jun-19 2018 2019

Office Net Face Based on Net Face Overall (June)

Auckland CBD 1.5% 6.0% 6.2% 5.0%

Office Gross Face Based on Net Face Overall (June)

Wellington CBD 6.5% 4.3% 7.7% 5.9%

Office Net Face Based on Net Face Overall (March)

Auckland Metropolitan 2.6% 9.8% 6.0% 6.3%

Industrial* Net Face Based on Net Face Overall (February)

Auckland 3.8% 14.1% 2.2% 1.5%

Industrial* Gross Face Based on Net Face Overall (November)

Wellington 7.3% 10.9% 2.1% (2017) 1.5% (2018)

Industrial* Net Face Based on Net Face Overall (September)

Christchurch -0.8% 2.3% 1.9% (2016) N/A

Retail Net Face Based on Net Face Overall (June)

Auckland CBD 0.0% 0.0% 3.8% 5.7%

Retail Gross Face Based on Net Face Overall (June)

Wellington CBD 2.3% 3.5% 6.8% 4.2%

71 Boston Road, Grafton

Auckland | $3,625,000 | 5.4% 66 Wyndham Street, Auckland CBD

Auckland | $144,500,00042,60 & 70 Favona Road, Mangere

Auckland | $29,000,000