Overseas buyers spending up
Foreign investment into Australian property is forecast to reach as much as $18 billion in the coming year as more property securities groups raise their allocation to the sector in search of higher yields.
In the past year, as much as 80 per cent of properties in Sydney, and parts of Melbourne and Perth, have been from first-time buyers. While some have been domestic, such as DEXUS, with its $1.2 billion of deals since December last year, the majority have come from offshore investors.
The chief executive of LaSalle Investment Management (Securities), Stan Kraska, based in Chicago, said in Sydney last week that the Australian market was very attractive for overseas buyers.
He said globally the real estate sector had improved and was in demand, despite any higher currency concerns with the Australian dollar - before its most recent decline against the US dollar.
"The sector offers positive income growth from recurring rents, an average 8.5 per cent yield and well-covered dividend payouts," Mr Kraska said.
"We look at what you call the real-estate investment trusts that invest in the standard food groups of retail, office and industrial, as well as offices that have solid and long-term government tenants."
The LaSalle direct property division owns significant assets in Australia including joint ventures with Westfield, while the Singapore-based Keppel Group's KREIT arm owns a half-share in Mirvac's 8 Chifley Square, and the Old Treasury Building in Perth, and 100 per cent of 77 King Street, Sydney.
According to Colliers International's national director for capital markets, James Quigley, these overseas buyers have in their sights upwards of $18 billion in office, retail and industrial property in Australia.
According to new research from Colliers International, foreign investment into Australian commercial property markets totalled $759 million in the first quarter of 2013, with the total value of direct property transactions up slightly from $735 million in the same quarter of 2012.
"This demand is in fact increasing, with recent acquisitions by groups such as Bright Ruby Resources and Greenland, both from China, examples of new investors entering the Australian market," Mr Quigley said.
"We have calculated that offshore investors are currently looking to invest circa $18 billion in our office, retail or industrial property.
"Notwithstanding the ongoing discussion regarding possible yield compression in our markets, our yields remain relatively attractive for core assets compared to other countries," he said.
The head of Asia-Pacific forecasting at DTZ (a part of UGL), Kate Barrow, said the Asia-Pacific continued to drive growth in global invested stock in 2012, with China now the largest regional market on the back of strong economic fundamentals.
Ms Barrow said that emerging markets in the region performed particularly well in 2012, with Taiwan, Hong Kong and India all reporting strong growth rates, while Japan returned to positive growth for the first time in four years with 1 per cent growth.
"Deleveraging continued across Asia-Pacific in 2012, as private equity surpassed private debt as the largest source of growth in invested stock. The corporate bond market maintained its momentum, however, with a 40 per cent increase in issuances in 2012," she said.