A Hong Kong based expert in commercial property says the yields from New Zealand property are among the most attractive in the world.
Head of global research at property company CBRE Nick Axford says the annual returns from Auckland office buildings are about 7.73%, compared with Tokyo's at about 3.5%, and Hong Kong's at less than 3%.
Dr Axford says investors regard commercial property investment as a strong hedge against potential inflation, and property yields are also much more attractive than the yields currently available from bonds.
He says the impact of quantitative easing and other monetary policies around the world has been to push down the yield and the return available, particularly on secure Government bonds and other similar types of assets.
Dr Axford says investors have been focused on where they can go to get secure bond-type investments given the uncertainties facing the world, but preferably as a high yield.
He says the characteristics of real estate are that it is a real asset, companies sign relatively long leases and tend to keep paying their rent as long as they are in business.
"So you've got good, secure, bond-type income, but the yield that you get is significantly higher than the equivalent bond that you would pay on a corporate or government bond."
Dr Axford says investors are looking at short-term growth prospects, the land title rights, quality of the leases, companies and buildings, the security and stability of the political system.
He says demand has pushed prices for good quality investment property to quite high levels in many markets around the world.
Dr Axford says comparatively New Zealand is a quite a small market but it offers many of the things investors are looking for such as stability, security, quality of property, quality of income and potential growth through the economy.
He says it's also at a relatively attractive price compared to many other markets.
Dr Axford says investors are still nervous about the impact of changes in monetary policy, particularly in the United States where the Federal Reserve has effectively been printing money at the rate of $85 billion a month.
In more normal times, printing money would fuel inflation although currently it is not.
Dr Axford says there may come a time when an inflation hedge, such as prime property, could become even more valuable than it is currently.
