Road to riches

Road to riches

Total Property - Issue 7 2018

The Belt and Road Initiative (BRI), designed to reinforce China’s position as the world’s biggest trader – with massive investments in ports, roads, railways, pipelines and other infrastructure projects around the globe – has major repercussions for New Zealand and its property scene.

That’s one of the conclusions that can be drawn from a recent report by international real estate consultancy Knight Frank.

The study points to increasing Chinese investment activity into this country’s property market.

In a detailed comparison of the markets in 67 countries, it ranks New Zealand fourth on a new Belt and Road Index designed to help inform investment strategies across the region centred broadly around the ancient silk road.

A key factor is this country’s No 1 ranking for ease of doing business globally. New Zealand is also rated first for institutional effectiveness – including government effectiveness, regulation quality, political stability and the rule of law.

The BRI is of paramount importance for China over the next 30 years, and will help secure its future as a global economic superpower. First outlined in 2013, it sets out a US$900 billion programme of investment in energy projects, ports, railways, highways and economic zones in 69 countries.

Through a collection of trade deals and infrastructure projects it is creating new trade routes, economic links and business networks in Europe, Africa, Asia, the Middle East and Oceania.

Knight Frank Asia-Pacific regional head Kevin Coppel says it is one of the clearest manifestations of China’s global vision and influence.

“The ‘Project of the Century’ will provide enormous opportunities in the built environment over the coming decades. Opportunities are widespread, with improving bilateral relations between BRI countries and China providing potential for real estate investment, development and business expansion.”

Knight Frank China managing director Alan Liu says that, with a vision so vast “the BRI will undoubtedly be one of the most significant drivers in international real estate markets over the coming decades”.

New Zealand has already seen the impact of Chinese investment, and indications are that this country will continue to benefit from China’s growth, though the only major New Zealand infrastructure project listed by Knight Frank as directly linked to BRI – a proposed Northport road and rail related project at Whangarei – is still in the starting blocks.

In just 10 years, trade with China has quadrupled and China has become New Zealand’s largest trading partner. Two-way trade in the past year topped $27 billion and is forecast to reach $30 billion by 2020.

Last year 40,000 Chinese students were enrolled here and China has become the second and most rapidly growing source of tourists with over 436,000 visitors in 2017.

This has been coupled with rapidly growing Chinese investment in various sectors – firstly in farming and food, but increasingly in infrastructure, commercial real estate, apartment and hotel development.

NZ China Council executive director Stephen Jacobi calculates that this investment has soared to about $12.8 billion, from $1.1 billion in 2011. A council report identifies 117 major or substantial projects.

“All foreign investment increases the capital that we have available to develop the domestic economy.”

Jacobi estimates that 85 percent of the money is coming directly from mainland China, and 15 percent through Hong Kong.

An estimated 17 percent of Chinese investment is going into commercial properties, hotels and apartment developments.

Property Council chief executive Connal Townsend says this is playing an increasing role in New Zealand’s commercial property scene.

“We’ve got a major job in our cities to do some serious urban rejuvenation and the key thing New Zealand faces is that we have very thin capital markets. To get projects up and running we have to get overseas investment to help.

“Traditionally China has been a pretty willing investor. So it’s a crucial part of the business, in commercial property but also into large scale residential property.”

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