Net yields on desirable small commercial properties remain under 5%
Small commercial properties are still popular among “mum and dad investors” despite the impacts of COVID-19, with net yields of excellent properties remaining below 5%.
Investors seek small commercial properties with net yields under 5% as alternatives to term deposits for a long-term source of income. However, raising finance might result in trouble for potential investors.
“Most of the investors in the market for this type of property could either afford to pay cash or had other assets they could use as security for a mortgage,” said Bayleys agent Tony Chaudhary, as reported by Interest.co.nz.
He added that this type of property remains popular despite the impacts of the pandemic because demand continuously exceeds the supply. Therefore, prices might continue to increase as investors lean towards slightly lower yields to secure the properties they want while interest rates continue to drop.
Read more: Mum and dad investors eager to return to the market
Meanwhile, retirees have been avoiding commercial building investments and syndications as they are concerned about the economic impact of the pandemic.
“Increasingly, residential property is looking like a good place to put your money. Housing demand still outstrips supply and sale prices continue to defy any doom and gloom,” said Derryn Mayne, the owner of Century 21 New Zealand.
“While rents in some areas will no doubt soften, the returns remain way better than bank interest, and of course, a solid capital gain will always be delivered in the medium to long term.”
