Source: Savills - 5th October 2011
Why are Asian investors snapping up Melbourne property? With stock markets in a state of dislocation, by contrast real estate markets in the region are continuing to attract both private and institutional investors well with a succession of deals being completed by a range of investors.
It should come as not surprise that as stock markets are becoming increasingly volatile and Australia is seen as a safe haven due to it’s attractive and stable economy that investors are buying up reals estate across Australia. Already vast tracts of rural land have been purchased but Chinese food conglomerates as well as state investment funds; now we are seeing yet another surge of interest by private investors in reseindtial property.
Real estate has always been seen as presenting a good opportunity for investors to secure cash flows in the form of rents that have the potential to keep up with inflation. Indeed, the most attractive market for international investors recently has been Australia, one of two countries in Asia Pacific with an S&P AAA credit rating, the other being Singapore. In the quarter to end June 2011, the total direct investment volumes in Australia real estate were just under US$4 billion, of which US$1.7 billion was from overseas investors. Asian investors see Australia comic’s fortunes as tied to China and, increasingly India
Our proximity to Asia
Interest in Australia is expected to continue, as the economy is much more closely tied to China than to the US.
In key areas, it is recognised that there remains a lack of supply of good quality real estate in number of Australia’s major cities; and demand for inner-city Melbourne land from Asian developers, as a case in point, has reached “unprecedented” levels over the last 18 months with some landmark commercial buildings being sold to Asian buyers including private as well as institutional buyers from Singapore and Malaysia along with many mainland Chinese private developers.
One of the attractions in the latest bout of buying interest has been the relative attractive of Melbourne commerce real estate against Sydney’s with Melbourne offering higher yields. Observers from agencies have noted that buyers from China, Singapore and Malaysia have been attracted by Australia’s financial stability and Melbourne’s comparatively inexpensive land values.
With the global economy experiencing some uncertainty, Australia, and more particularly Melbourne, is the destination of choice for Asian development capital seeking to secure development land for high density apartment projects where continued intra-state migration as well as immigration levels indicate Melbourne as offering the attractive combination of sustained population growth, inexpensive land compared to home markets, the potential for significant growth. Further Melbourne has been acclaimed as “the world’s most liveable city,” a title that will support direct financial ratios.
On the residential front, one agent reported the sale of 17 properties with residential development potential since March last year with more than half of those to off-shore Asian purchasers. Once again, citing Melbourne’s relative stability in an increasingly uncertain global economic climate, as an attraction to Asian investors and developers.
That combined with the opportunity to source funding form off-shore has put Asian developers in a competitive advantage over local developers who remain crimped by exceedingly robust lending criteria by banks.
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