State of the Nation

Agents don’t need us to tell them what is going on in the property market currently. Every agent is aware that purchasers are as slow as ever to make a commitment, that banks don’t want to lend, and that getting a response to an email is harder than ever.
But in the wider community there are other changes taking place which inevitably intersect with the industrial market.

There are businesses going out of business. Whether that is when the receivers are called in, or owners simply finding the marketplace too tough and giving up. It’s just a trickle as yet, and mainly applies to the SME segment, but with the combination of higher rents, increased compliance costs, competitor discounting, decreased demand etc it is becoming just too hard for some operators. That emphasizes how important tenant selection is if you want a consistent rent flow. On the positive side, there are many well run businesses who are doing very well. There is hurt, but there are also plenty doing well in the business community.

Higher interest rates don’t impact everyone.  There has been a lot said about the effect of higher interest rates – particularly the effect on household mortgage payments, and on borrowing costs for landlords and businesses. Yet the reality is that only a third of households have mortgages. Another third rent. And the other third are mortgage free. Additionally there are plenty of businesses which have built up funds over the years and don’t need bank funding. In other words they haven’t stripped  the business to fund a lifestyle, but have been prudent and re-invested. Similarly there are property investors who are cashed-up and don’t need bank funding so the argument that the cost of bank funding is higher than yields is irrelevant. They are playing the long game and eyeing consistent cash flow and capital gain – not just the short term view.

There are no fire sales. The media may highlight half finished residential developments in liquidation. And one agency this week wrote “The market is changing into an opportunity-laden landscape”. But out in the real world those of us with feet on the ground know that the reality is far fewer “opportunities” than predicted. The predictions of hiked interest rates forcing vendors to bail have proved sadly incorrect.

The new government will change things. If you look at the struggle Wayne Brown is having to eliminate waste and dumb stuff in Auckland Council then you would not be overly optimistic that any new government can make a dent in the turgid morass of the civil service. Rather than seeing a mass of empty office space in Wellington, our bet is that “Yes Minister” will ensure nothing much changes in the short term.
 
But the most glaring observation that we see in the community currently is that there is so much that is  counter-intuitive.

With the massive slowdown in transactions in the industrial market  we might have expected there to something of an exodus of agents to other careers. But the reverse has happened. In fact there are more agents than ever.
The supply chain issues have all but disappeared, and at the same time a lot of work for many industries has dried up. Yet still many businesses either don’t answer their phone/email, or don’t respond at all promptly. Bad habits learned during easy times die hard.

The mood of the nation (after the disappearance of Saint Jacinda) was decidedly sour. But there was a constant refrain that after the election things would change. Now the refrain is that things will change after Christmas. We naively thought that a change of government would have seen refreshing optimism. Not so. But we retain our optimism that falling inflation rates in other parts of the world will change the mood.

And just as some dark clouds are reputed to have silver linings,we have spotted some special deals pre-owned Audis, so all is not lost.