We believe that now is the time to invest as the recently announced budget has given some certainty to the future with tax cuts effective in October this year.

This should ensure the economy is well primed and will support retail spending.

The outlook for interest rates appears to be for a steady decline over the next year.

The market has been quiet; however quality investments are well sort after, although we have an increasing number of these investments listed due to negative media comment, which has caused some investors to think that they should wait for lower prices.

It is our belief that now is the best time as our supply of property listings is as large as it has been for over 4 years.  We believe that this is an opportune time, as fewer buyers are competing for these investments as were in the past.

Vendors are more negotiable.

The other compelling reason why we recommend investing is because the rental growth experienced by commercial investors over the last few years.  Please refer to our case study.  20-30% annual returns are common and the associated tax benefits of depreciation mean the after tax returns are very attractive.

In conclusion with the economic stimulation of the budget, consumer spending and decreasing interest rates, we think the number of investments over the next 6 months will rapidly decrease as buyers return to the market.

BUY NOW – BE COUNTERCYCLICAL 

There are many people willing to sing the praises of commercial property.  How better to illustrate this than with numbers to show returns.

Lighting Plus was purchased in 2003 for $970,000 plus GST returning a rental of $92,000pa plus GST and outgoings.

With regular rent reviews these premises are currently rented at $119,000pa plus GST and outgoings and are valued at $1,700,000.

NB:

1) Rent is up 29% ie: rent has risen 5.8% per annum adding value to the asset.

2) Capital value has risen 75% ie: 15% per annum.

3) Capital growth has been $730,000 plus GST in just 5 years.

4) Total Gross Return is:    7% (net return) + 15% (average capital growth) = 22% per annum.

Metropolis Café on Victoria Street, Hamilton was purchased in April 2000 for $360,000 plus GST returning a rental of $36,000pa plus GST and outgoings.

With constant rent reviews these premises are now rented at $60,000pa plus GST and outgoings and is valued at $900,000 plus GST.

NB:

1) Rent is up 68% ie: rent has risen 8.33% per annum.

2) Capital value has risen 250% ie: 25% per annum.

3) Capital growth has been $540,000 plus GST in just 8 years.

4) Total Gross Return is:   6.6% (net return) + 25% (average capital growth) = 31.66% per annum

A property in Liverpool Street was purchased in 2003 for $920,000 plus GST returning a rental of $90,000pa plus GST and outgoings.

With constant rent reviews these premises are now rented at $110,000pa plus GST and outgoings and is now valued at $1,570,000 plus GST.

NB:

1) Rent is up 22% ie: rent has risen 4.4% per annum adding value to the asset.

2) Capital value has risen 70.7% ie: 14.14% per annum.

3) Capital growth has been $650,000 plus GST in just 5 years.

4) Total Gross Return is:   7% (net return) + 14.1% (average capital growth) = 21.1% per annum

These are 3 examples from many taken during good times in the market.  They illustrate outstanding returns on investment and I believe it would be difficult to find any other secure investment to match them.