The impact of the lockdown on the property market is becoming
clearer. And it's significant.
The NZX listed Kiwi Property Group (KPG) has this morning
released details of its latest valuation as at 31 March 2020. It owns a substantial
portfolio and range of property types so it is a useful insight into the way
the market as a whole has been impacted.
The Company’s retail portfolio declined by 20.8%. Their shopping
centres were the most affected. The capitalisation rate increased from 7.5% to 8.1%
The office portfolio decreased by 1.6%. The weighted average
capitalisation rate remained unchanged at 5.5%.
In the commentary, the Company said, "the valuation assumptions around rental growth, vacancy,
downtime, leasing up allowances and trading conditions have all softened. The
challenging investment market conditions and an expected decline in capital
inflows are also contributing to an expansion in capitalisation and discount
rates."
It will be some time before the residential property market
metrics play catch-up. In the absence of hard data, the ANZ is predicting an
annual decline of between 10% and 15%, "with downside risk". Some are more pessimistic.
What we can say is the property market is in for a rough
ride and there challenges ahead for low-equity investors.
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