Economist expects rents and property values to plummet over the next three months
The COVID-19 pandemic has continued to hit the economy and various markets, and the alert level 4 lockdown in March greatly impacted the real estate sector. As a result, many people seem to have temporarily lost interest in climbing the property ladder.
According to the Royal Institution of Chartered Surveyors (RICS) New Zealand Commercial Property Monitor Q1 2020 survey, investments and confidence in the commercial property sector have plummeted. In contrast, prime office and industrial properties continue to stand firm.
The survey predicted that prime office rents would remain stable amid the pandemic as they are expected to drop by only 0.6% in the next 12 months, and prime industrial rents might increase by 0.4% in the same period.
Sean Ellison, a senior economist at RICS Australasia, said he expects rents and capital value to plunge over the next three months.
“Prime office and industrial properties are expected to be more resilient than retail, with prime office seeing little change in rental and capital values,” Ellison told Stuff.co.nz.
Read more: Coronavirus: Auckland property market activity plummets
However, the survey warned that prime retail rents are more likely to drop by 5.1% over the next 12 months and secondary retail rents by 9%. It expected that the value of prime retail property would drop by 2.8%, secondary retail by 1.2%, and secondary office by 3.8%.
“There has been a steep decline in the optimism of commercial property professionals in New Zealand. However, while sentiment is certainly taking a hit, the reaction does not appear to be as severe as it was during the depths of the GFC,” said Chris Nicholl, managing director of RICS Australasia.
He welcomed the government’s announcement that it would help businesses to meet their cashflow needs amid the pandemic through the Small Business Cashflow Loan Scheme. However, he insisted that the government must continue supporting the commercial property sector until after the COVID-19 crisis so it could recover fully.
