February 12, 2021

Views across the Ditch


Emerging New Zealand senior lending environment offering exciting opportunities.

The Partners Fund has benefited from the diversity provided by its exposure to New Zealand, which is currently just under 7%. This exposure has, until now, consisted mostly of agricultural opportunities driven by the RBNZ’s requirement for reduced commercial bank exposure and government policy limiting foreign asset ownership. The New Zealand opportunity set being presented is now broadening.

Overall New Zealand hard asset prices have seen strong growth driven by monetary policy and government stimulus. The REINZ (Real Estate Institute of New Zealand) house price index rose 17.9% over 2020, including an 18.8% increase in Auckland house prices. Median house prices and inventory levels are both at record – high and low, respectively – levels, with the residential sector buoyed by a critical shortage of housing supply. Other commercial real estate markets have also performed well during 2020, and the current momentum indicates further market strength throughout the year.

These supportive conditions, combined with the retreat of the major banks, has created a number of attractive senior lending opportunities in New Zealand across a range of asset classes including hotel, office and residential development. We continue to review these opportunities and our exposure to the New Zealand commercial real estate market is expected to increase accordingly.

In agricultural markets, the key market themes continue to centre around operators looking to take advantage of good seasonal conditions and favourable commodity prices by expanding or developing their existing asset base. Agricultural property values continue to appreciate, and the outlook is positive. We are also seeing strong demand for development capital, including change in land use, intensive horticulture development, water infrastructure development and infrastructure development.

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