Property remains a stable and attractive investment
With the benefit of hindsight, the property investment market at that time was fragmented, still in the early stages of securitisation and experimenting with different ownership and management models. The market was as exciting as the move to Sydney.
Now, having weathered a few economic and political cycles, the market has matured and its shape has changed. Driven by inexorable cash inflows from compulsory superannuation contributions, the big super funds continue to aggregate as they seek economies of scale to remain competitive for their members. Fewer, bigger funds typically mean fewer, bigger investments are sought. Fewer individual investments require less analysis, less reporting and, consequently, cost less to manage at the fund level.
To remain relevant, property fund managers need to have scale, significant capital backing and a strong, ideally global, distribution capability.
This has seen ownership of the bulk of high-quality investment-grade property assets moving into the hands of large, well-capitalised superannuation funds, which tend to trade on strategic asset allocation imperatives rather than any pressing need to realise cash. This is likely to result in fewer transactions.
The stability offered by the physical property market during the global financial crisis also brought significant foreign investment into Australia.
In broad terms, the commercial space markets appear to be in equilibrium. This is particularly so for office and industrial, and perhaps less so for retail, which is undergoing profound change as the sector belatedly comes to grips with the impact of online retailing.
The conclusion is that, just as Sydney remains a stunning city in which to live, the Australian property investment sector remains attractive and sought after.
Frequently Asked Questions about this Article…
Sydney is renowned for its natural beauty and cosmopolitan nature, making it an attractive location for property investment. Its stable market and the city's appeal contribute to its desirability among investors.
The Australian property investment market has matured significantly, moving from a fragmented state to a more consolidated one, driven by large superannuation funds seeking economies of scale.
Superannuation funds play a crucial role by aggregating investments to achieve economies of scale, resulting in fewer but larger investments. This approach reduces management costs and enhances competitiveness.
Scale is important for property fund managers to remain relevant and competitive. It allows them to have significant capital backing and a strong distribution capability, ideally on a global scale.
During the global financial crisis, the stability of the physical property market in Australia attracted significant foreign investment, highlighting its resilience and appeal.
The commercial property market in Australia is generally in equilibrium, especially in the office and industrial sectors. However, the retail sector is undergoing changes due to the rise of online retailing.
Fewer property transactions are occurring because large superannuation funds, which own a significant portion of high-quality assets, focus on strategic asset allocation rather than frequent trading.
Yes, the Australian property investment sector remains attractive and sought after, much like the city of Sydney itself, due to its stability and the strategic approach of major investors.
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