Cash is King for Investors but the market is starting to turn.
As we now officially past the half year mark.... I decided to look at the current market trends within investment to see what the mood has been and where we are potentially heading, and from my reading it reflect a cautious optimism among investors.?
Looking at the latest RBNZ data that I could get , I looked at the breakdown of asset allocation for managed funds. Although cash has been king for investors seeking yield and safety , there is a noticeable upswing in listed equities steadily over the last 12 months (to March 24). The next update from RBNZ is August 26th so I will revert into next month's newsletter and see if this trend continues!?
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Source - RBNZ
This month I also saw a significant increase in investors seeking to purchase or sell commercial property (CRE). CRE is an asset class I haven't done a lot with from an acquisition perspective (I've funded a fair few!) but this upswing in interest made me have a look at the market to understand where the opportunity is.?
Colliers released a recent report and it perfectly showed me where the opportunity is - and that's buying!
What this graph is telling me is that continued interest rate pressure has substantially impacted cap rates of CRE driving the prices down. For those in Syndicates or highly leveraged will most likely see some covenant breaches with their funders...
For the opportunistic investor however , it could be a ripe opportunity to pick up a bargin considering income (Rent's) remain strong - especially in Christchurch! looking at vacancy rates compared to other major centres - albeit lower capital growth.
So with this opportunity, I have reached out to a commercial property specialist to provide regular updates on the moving market of CRE and access to off-market deals for investors.?
Market Intel
Market Intel brings insights from key professionals in the world of business and investments. The concept of market intel is to expand knowledge from those in the front row of the business world. Every month we interview select professionals for their up to date market insights.?
This month we spoke with Colin Slade from Forsyth Barr on what July has been like for equity markets.? Colin joined Forsyth Barr Christchurch in 2022, having spent the previous 15 years playing professional rugby in New Zealand, France and Japan.?
Colin is a registered as a financial adviser and is working towards his NZX Adviser accreditation. He holds a BA in History and Media Studies, the New Zealand Certificate in Financial Services (Level 5) (Investment), and is currently completing a Postgraduate Diploma in Business with Auckland University.? Colin is a proud dad of three wonderful daughters and enjoys quality family time, barbecues, and staying active by running and playing golf.
We are also joined by Ben Storch of Storch Portfolio on what opportunities exist in the commercial real estate market and why. Ben is a dedicated professional with a background in mechanical engineering and project management, transitioning into a dynamic role as a commercial residential developer and acquisitions specialist.
You can also listen to our previous Podcasts here?
If you would like to join Market Intel and provide some insights to our followers drop me a line?
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Investment Markets - Colin Slade
The financial markets have been a good place to be in recent times, and there’s plenty happening which creates excitement. Talk of interest rate cuts has quickly improved investor sentiment as forward-thinking financial markets are now?reflecting?the next stage of the economic cycle.
Inflation has been the key narrative, and evidence that it is declining has increased economists forecasting that we could soon see a?series of interest rate cuts over the next 12-18?months. This is good for financial markets and we are seeing improved investor sentiment?as a result.
Despite months of declining business and consumer confidence, the most recent ANZ economic outlook survey appears to provide some green shoots in terms of improving local confidence, albeit from low levels. Make no mistake, there is?weakness?out there,?however this supports the likelihood of interest rate cuts.
Cash and term deposits have?recently?provided?sufficient?returns for most investors, but for how much longer will they be there? Never in history has there been more money sitting in money markets (cash and equivalent assets). We expect these funds to rotate?out?to the share market?as investors seek?better?returns.
Focusing on Markets
In New Zealand, the recent proposed takeovers of Arvida and The Warehouse have highlighted that there is value here. This has injected much?needed optimism into NZ markets—particularly the aged care sector. Australia appears to have stickier inflation, and therefore interest rate cuts may be?a story for 2025. The US Federal Reserve has indicated that interest rate cuts are likely this year, which has boosted confidence. Despite the stellar returns of the S&P 500 over the recent 18?months, driven by?the?technology?rally, we continue to see good opportunities in the US.?The upcoming election will be closely watched, although historically it has had minimal impact on financial markets.
Overall, we are optimistic about the near term outlook; noting that we are long term investors. If anyone wishes to discuss or review their investments, I’d be happy to assist.
Commercial Property Market - Ben Storch
Off-Market Transactions: A Prime Opportunity and our Specialty
In the dynamic world of commercial real estate, timing is everything. As we navigate the midpoint of the year, the market presents a prime opportunity for savvy investors to engage in off-market transactions.
With potential interest rate movements anticipated towards the latter part of the year, acting now can secure favorable prime Commercial Real Estate (CRE) and capitalise on current market conditions. Off-market deals not only provide a unique edge by reducing competition but also often unveil properties with significant upside potential.
We’re observing robust investor interest, particularly around the 7-8% cap rate range. This indicates a healthy appetite for well-positioned assets that promise strong returns, this period offers a strategic window to maximize your investment potential.
Stay ahead of the curve and seize the opportunities that our off-market transactions present today whether you’re looking to expand your portfolio, Purchase target- specific commercial real estate investment, or offload some of your portfolio to free up capital.
Connect with us to explore exclusive listings and tailored investment strategies designed to meet your financial goals.
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