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New Zealand 'red hot' for Chinese property investors
Brief:Chinese government in the last four years carried out some initiativees to encourage outbound investment for providing impetus to investment in New Zealand.
Interest among overseas investors in New Zealand property is "red hot", says Andrew Reed, international director of capital markets at Colliers International.

Commenting on the agency's Capital Markets Report, based on a survey of the world's top commercial and industrial markets, Reed also predicts more Chinese investment in New Zealand commercial property.

Auckland's CBD office yields are at 7.7 per cent compared to Hong Kong's at 2.6 per cent.

Last year was "a defining moment in New Zealand's history" in regards to overseas property investment, he says.

"Offshore purchasing activity has typically been below 15 per cent of overall value, and below 10 per cent of the number of sales, signalling higher value price points of these sales."

"But, in 2014 almost half the total value of properties sold for $5 million or more in New Zealand, was sold to offshore investors - representing one fifth of all transactions.

"Offshore purchasers from Asia Pacific countries like Australia, China, Singapore, Malaysia, Indonesia and Japan have been the stalwarts of offshore purchasing activity in New Zealand real estate for two decades and in the past, many of the larger listed and private investors shied away from New Zealand citing distance and market liquidity as barriers to entry."

However, new entrants with significant purchases such as PSP Canada and GIC from Singapore have given the seal of approval and added significant depth to New Zealand's investment market.

"This will open the door for more offshore investors looking to diversify their portfolio while keeping returns high," Reed believes.

Given the large values and management commitments required, Reed also expects more joint venture partnerships between offshore and domestic property companies in the future.

"Chinese now account for 4 per cent of New Zealand's population and 69 per cent of New Zealand Chinese live in Auckland - compared to just 3 per cent in 2001.

"The registration of Chinese banks in New Zealand in the last two years such as the Industrial and Commercial Bank of China (ICBC), Bank of China and China Construction Bank will also increase transactions. As a result, leveraging and investment processes will become more streamlined".

Other key factors initiated by the Chinese government in the last four years to encourage outbound investment for countries are also providing impetus to investment in New Zealand such as:

• endorsing the Chinese 'Go Abroad' policy;

• allowing China's insurance companies to invest directly in overseas property;

• imposing stricter domestic purchasing requirements;

• streamlining tax clearance procedures for corporate remittances;

• relaxing controls on corporate overseas price investment thresholds, notifications and approval systems; and

• considering relaxing processes and thresholds for individual outbound investment from $USD 50,000 to $USD 2 million.

The New Zealand Herald

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