Investment trusts record highest returns

Media Release

14 May 2013

Investment trusts record highest returns

New Zealand real estate investment trusts recorded stellar returns this past year, according to the Investment Property Databank (IPD) and reinforced by industry commentators at a seminar in Auckland today.

The Property Council IPD New Zealand All Property Index Q1 results, released today, show commercial property trusts achieved an annualised return of 19.2% for the year ending March 2013. Equities are the closest competing asset at 14.3% for this same period.

New Zealand Institute of Economic Research principal economist Shamubeel Eaqub told property industry members that he expects the country to experience a sustained rate of economic growth.

Reviewing sector growth, Mr Eaqub expected construction to increase by 4.6%, office by 2.6%, retail and hospitality by 2.9%, and logistics by 2.9% over the next five years. He expected manufacturing growth to decrease by -0.7% during this period.

“Certain services are really positive. Shipping and logistics are currently very strong – this is a big change on five or ten years ago. For example, we need to start thinking about how people use internet shopping and maximise our investment in this area. The industrial sector will respond to this demand.”

IPD Australia and New Zealand’s managing director Anthony De Francesco followed, commenting that all sectors in New Zealand were improving. “Overall, the recovery across all sectors is looking good. Office returns are particularly positive and the industrial sector is holding steady.”

Combined total property returns revealed in the Property Council/IPD Index for the year ending March 2013 reached a new high of 10.6%. Total annualised returns for New Zealand’s retail, office and industrial sectors were 12.4%, 9.5% and 10.0% respectively.

“When we compare the market’s performance to what is happening in Australia, New Zealand is performing well. Australia is entering a period of moderation, similar to what is happening around the world,” said Dr De Francesco.

Property Council’s chief executive Connal Townsend said the organisation proudly champions commercial property as a worthy investment. In its policy manifesto Fast Forward to Growth, the organisation said: “At least 20 per cent of the New Zealand Superannuation Fund should be invested in New Zealand equities (including listed and direct property trusts) to support productive sectors within the New Zealand economy.” He noted the index results show this would be a wise move.

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