NELSON MARKET

The local commercial property market has maintained a steady level of sales activity since 2012.  Analysis continues to show a strengthening of yields for well located, securely leased properties with a high seismic rating while those less favourably located, with shorter lease terms or a low seismic rating have seen a weakening of yields.  Financiers and investors remain keenly interested in weighted average lease terms and seismic rating in considering the risk profile of any property. 

In general, rental rates for modern, well located premises are under pressure to increase as demand edges ahead of supply and developers seek a fair return on escalating development costs.  Poor demand continues for second-tier and older accommodation types with rental rates showing little change.

Increased insurance premiums are persisting, especially for older buildings not meeting current seismic strength requirements.  We anticipate that such properties will see greater levels of discounting from purchasers and tenants alike due to the higher costs and risks of ownership or occupancy.

Over the last five years Variable First Mortgage Housing Rates have ranged from a peak of 6.71% (August 2014) down to 5.36% (November 2013) and with rates currently trending downwards in line with the OCR.

 According to ANZ Bank "Regional Trends" figures issued for August 2015:

 Quarterly activity declined 1.4% in the Nelson-Marlborough region in the June 2015 quarter, recoiling after strong quarters prior.  Despite this, annual average growth was 3.0%, ranking Nelson-Marlborough’s growth the 5th highest of the regions. Nelson-Marlborough’s real estate displayed strength in the June quarter. House sales rose 6.7% q/q, and section sales were up 31.3% q/q, with new subdivisions coming onto the market.  House prices rose 0.7% over the last three months, but farm sales volumes were down 6.8% q/q.  The volume of dwelling consents fell but the value of dwelling consents rose strongly in Q2. Retail sales were flat in the June quarter, although Paymark transaction volumes were up 7.7% q/q and car registrations rose 3.5% q/q.  Retail sales were 2.4% higher than 12 months ago.  The region’s unemployment rate rose to 4.8% in the June quarter, although this remains well below the national average of 5.9%.  This is the fourth-lowest recorded unemployment rate of any region this quarter.  Employment fell 0.3% q/q in the June quarter.  Nelson-Marlborough’s business sector was subdued in the June quarter.  The ANZ Truckometer fell 0.7%, as did commercial building activity and tourism sector indicators.  But regional exports lifted strongly (4.9% q/q) and are 9.7% higher than a year ago.

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