Foreign investors have helped boost New Zealand commercial property prices and sales in the past six months, helping to ignite development in the sector which has previously been subdued.
Retail, industrial and office building values are rising at an annual 7.8 per cent pace and are worth about $180 billion, supporting the prospect of a sharp increase in sales this year, according to the Reserve Bank.
The bank's six-monthly financial stability report said strong tenant demand has underpinned capital growth and stoked developers' appetite after funding dried up when the finance company sector collapsed.
"Development activity is beginning to increase, particularly in the office sector, in response to rising activity and values," the bank said in its report.
The attraction of high yields has lured international investors, with Singaporean wealth fund GIC recently buying into the local Westfield mall portfolio, and also co-investing in a planned development in Auckland with Goodman Property Trust.