Activity in Australia’s commercial real estate market ranked amongst the top three in the Asia Pacific region over the last five years. Underpinning this position, cross-border investment into Australia was the highest of all the APAC markets between 2012 and 2014, evidencing that Australia has risen as an investment destination. Foreign investors have lifted their net balance sheet exposure to the Australian commercial property market by AUD18.8b since 2005.
Real estate is part of a broader investment story in which demand for Australian assets has risen due to higher economic growth, perceptions of lower risk and the combination of higher interest rates and yields. Australia has represented 5% of global property turnover in the last 3 years, well above its GDP weighting of 2%.
On the whole, we are optimistic of a continuation of current trends over the next the 12-18 months, although acknowledge that factors which have supported Australia’s relative attractiveness will fade beyond that. An improvement in economic growth in the global economy and a return towards “normal” interest rate settings, while appearing some way into the future, will be the likely catalyst. However, this appears to be a 2016/2017 story with Australia sustaining a gap until then. For capital flows the outcome is more likely to be an easing of flow back to “normal” levels rather than an exodus.
Head of Research, Australia
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