While returns from commercial and industrial property have fallen over the past 18 months, New Zealand property has outperformed most other countries in the world.
Statistics released by Investment Property Databank (IPD), an international real estate performance analysis organisation, and reported in Bayleys' latest Total Property magazine, show a numberof European property markets are producing substantial negative total returns (income plus capital value movement) caused in the main by plummeting capital values.
British and Irish property markets are particularly grim. Total returns for all types of commercial and industrial property in Britain in 2008 were minus 22.1 per cent with capital growth falling by more than 26.3 per cent. Ireland, the much-touted "Celtic Tiger", was the worst-performing property market of all those tracked by IPD with its total property return for the 2008 year plunging by 34.2 per cent.
In contrast, New Zealand total returns for direct property investment in all types of commercial and industrial property stood at 9.4 per cent for last year, according to IPD.
Only one other country measured by IPD produced superior returns to New Zealand in 2008 and that was South Africa, where total returns were just over 10 per cent.
Over a five-year period to the end of 2008, the New Zealand commercial and industrial property market was also the second best performing market measured by IPD, producing a total average return of 16 per cent a year. Once again only South Africa bettered this, with its market producing total returns in excess of 20 per cent.
New Zealand's returns in 2008 were down from 22.4 per cent in 2007. The primary catalyst for the fall was a decline in capital returns, down to just 2.1 per cent in 2008 compared with 13.7 per cent over the previous 12-month period. Income returns weakened marginally to 7.2 per cent, from 7.7 per cent in 2007.
However, New Zealand's returns were significantly ahead of Australia where total returns for all types of commercial and industrial property were only just positive at 1.8 per cent in 2008. IPD says the Australian market experienced its largest individual quarterly decline in value since 1993.
Back home, Auckland CBD offices provided the largest annual gains, with a total return of 12.78 per cent. New Zealand CBD office and Wellington CBD office markets provided investors with good total returns of 11.91 per cent and 10.96 per cent respectively.
