The Government's budget - delivered on the day the country embraced life alert level 2 - was New Zealand's biggest, a direct response to the Covid-19 crisis that included a $50 billion recovery fund.
Substantial funds have been allocated to business support, education and training, infrastructure, housing and the environment with sector support to provide a good start for tourism, primary industry, transport, Maori and Pasifika.
Of course, this comes on the back of another stimulus fiscal package from the Government announced only a couple of months ago. This included the reintroduction of depreciation deduction on commercial and industrial property, valued at $2.1 billion.
From a commercial property perspective, this has the potential to be a far reaching budget. It arguably offers something for everyone to grasp hold of, and leverage from, as we look to recover as a country.
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As part of the new budget, tenants will receive crucial financial business life-support in the short-term which gives the opportunity for some more time to see what the next normal looks like.
There is the prospect of a focus on greater training and a desire to enhance what New Zealanders can offer. It also specifically recognises the disproportional hardship of the tourist industry. Combined, these factors indirectly support landlords’ rental income streams and increase the chances of tenancies continuing.
For developers, the impact of infrastructure spend on longer term returns will create new growth locations and open up more sites over time. It also potentially supports the investment case for existing assets located within close proximity to upgraded transport.
Although it is always tempting to get bogged down in the detail domestically, at an international level, NZ has crafted a unique global position in having opened up the economy with Covid-19 seemingly nearly eliminated.
The Government is being heralded around the world for its handling of the crisis. There is a clear opportunity then for New Zealand’s property sector to take advantage of our envied reputation and look to tap into that from a property investment perspective.
New commercial property research has revealed that it is quite possible that many outlets, including corporate CEOs and data pundits, are actually overestimating the impact of Covid-19 on Asia Pacific real estate. This means the market could actually be in far better shape than what many have predicted.
That is not to say that Covid-19 will not impact many parts of the market to varying degrees of severity in future months. A greater amount of information will be essential at a micro-market level with a specialist sector lens rather than any attempts to generalise the property market as a whole or even retail, industrial or office sectors.
The next normal, as in any times of economic crisis, will necessitate an individual property centric model of assessment, no matter what sector. In times like this, the unique nature of property assets comes to the fore.
Recovery in our industry must be judged against activity in the property sector. The next three to six months will provide much more information about the future of the market than the last two months have.
So then, what is the most logical way forward?
Property is a long term asset class; always has been, always will be. My advice is to take stock, explore options calmly, and be as objective as possible in the short term to give the Government’s action time to take effect and hopefully defeat Covid-19 domestically.
We’ve responded, now it’s time to re-activate.
- Paul WInstanley is head of research for real estate and investment management firm JLL.
