Christchurch property market looks to 2023 with a strong shoulder to the headwinds

Take a walk around the Christchurch city centre this spring and it’s difficult to picture the fenced-off, post-earthquake scene just 10 years ago. The city is now humming with activity and vibrancy, with a plethora of quality international music acts lined up to play in the city in the coming months. Council commitment to proceed with Te Kaha Stadium is also tremendously exciting.

Nationally, Christchurch is gaining a reputation as a sought-after place to live, with a contemporary city centre, access to multiple recreation and lifestyle opportunities and a housing market which offers good value compared with many other main centres. We are aware of one international corporation expanding the size of its Christchurch headquarters to accommodate staff relocating here from Auckland for the lifestyle, while still retaining their Auckland roles. Christchurch is riding the remote working trend and becoming established as a leading work and lifestyle destination.

There are several other factors which we believe will help the local economy remain fairly robust in the face of a challenging global economic environment. ‘Revenge retail’ – where consumers fed up with lockdowns and online orders make up for lost time with an increase in spending – is boosting the post-Covid reputation of Christchurch as a key destination for retailers. Australian top tier fashion retailers now consider Christchurch the number two destination for expansion, after Auckland and ahead of Queenstown and Wellington. Our retail team is talking to a number of large Australian brands looking at expanding into Christchurch following establishment of stores in Auckland.

In addition, following the opening of Costco’s new store in Auckland, we are expecting imminent commitment from the retailer to a site in Christchurch. The retail investment scene is also active on the back on strong returns. We received $375m of offers for the Eastgate retail centre from local, national and Australian parties, demonstrating the wider interest in Christchurch as an attractive investment destination.

At the recent National Retail Conference in Auckland, ‘revenge travel’ was the next emerging trend following ‘revenge retail’. This trend will positively help Christchurch continue to flourish as we reinforce our position as the gateway to the South Island.

In the CBD office market, low vacancy means tenants wanting to move are now having to look at available space well in advance of lease expiries. This creates a very tight and competitive market, surpassing current levels in Auckland, translating through to strong returns for landlords. Our new, low-rise building stock, with leading seismic engineering and modern performance, is a further point of difference compared with other centres which have a large proportion of older stock with leasing challenges. These factors will continue to attract high quality office tenants to the central city and developers are responding with plans for new construction projects.

The industrial market – Christchurch’s dominant property sector – continues its strong performance, but it now has genuine land and building supply issues placing upward pressure on rents.

A key theme in the market now is a meeting of the minds, where both buyers and sellers shift to a general acceptance of the inflationary and rising interest rate environment. We believe this will see more investment opportunities coming to the market in 2023, with landlords less influenced by the pricing levels achieved in 2021.

Finally, households are bracing themselves for mortgage cost increases next year as fixed rates roll off. To try to take a positive angle, Christchurch will in general be less exposed to the shock of upcoming remortgage risk, as our housing market did not reach the unprecedented peaks that were seen in other centres. This should insulate household wealth to a degree as we head into a higher mortgage rate environment, however there will still be a negative impact.

As we look ahead to 2023, there are undoubtedly very real and genuine challenges on the horizon. However, given Christchurch’s more sustainable growth trajectory over recent years and our rapidly-regenerating city, we may well be better placed to weather the storm as our city continues to develop into a leading, internationally-regarded destination for work and play.