A SHIFT IN CAPITAL FLOWS
At the same time, capital flows are beginning to splinter. Trade may be holding up, however, direct foreign investment into many Western markets is declining, Skilling says.
For a country like New Zealand, traditionally reliant on offshore capital to support large-scale developments and infrastructure, including high-rise and Build-to-Rent projects, this shift could pose challenges.
A reduced pool of global funding might slow some developments and exacerbate an existing undersupply of housing. For the rental sector, this could translate into upward pressure on rents in high-demand areas, particularly where population growth remains strong.
Yet, there’ s a silver lining. In a world where the geopolitical map is being redrawn, New Zealand and Australia are perceived as safe, stable, and attractive investment destinations.
“ In a world where the geopolitical map is being redrawn, New Zealand and Australia are perceived as safe, stable, and attractive investment destinations.”
As uncertainty grows in major economies, we’ re already seeing renewed interest in hard assets. Skilling points to a weakening U. S. dollar, alongside anecdotal evidence of European pension funds and institutional investors reallocating away from the U. S.
“ Home bias in capital allocation will become increasingly prominent,” he says. In simple terms, investors are reassessing the safety and profitability of U. S. markets and looking elsewhere, including to‘ safe haven’ economies like New Zealand.
For Kiwi property markets, this is significant. With New Zealand’ s stable political system, transparent legal structures, and limited land availability in urban centres, real estate remains a magnet for local and approved foreign capital.
In combination with the recent reduction in debt servicing costs, this appetite has the potential to sustain demand, particularly in prime locations such as Auckland, Christchurch, and Queenstown.
DEGLOBALISATION VERSUS DIVERSIFICATION
While Skilling cautions against prematurely calling time on globalisation, he notes that“ interruptions to globalisation are more likely to be seen in capital flows than trade flows.”
RAY WHITE NOW NEW ZEALAND | 22