Property News

Offshore investment pace more than quadruples to over $7bn

29 September 2006

Australian offshore property investment has more than quadrupled to just over $7 billion in the first six months of this year, compared with the same period last year.

About 80 per cent of the investment went to countries outside the Asia-Pacific region, said Kathryn Matthews, Australian head of research for real estate firm Jones Lang LaSalle.

Australians now rank, alongside investors from the Middle East, Germany and the US, as the largest players in global real estate investment, according to the firm's paper on global real estate capital. It said the dominant source of investment capital was the listed property trusts, which continued to receive record inflows as Australia's compulsory retirement savings pool grew.

Ms Matthews said in the first half of 2005, Australian investors spent almost $1.6 billion on overseas properties.

The US continued to be the main destination, absorbing 46 per cent of all Australian offshore property investment. However, Australian institutional investors had begun to diversify to Europe.

Germany was the most popular country in Europe, attracting about $1.33 billion of investment from the likes of Macquarie, Rubicon and other Australian property trusts.

Record Realty, controlled by David Coe, purchased seven office assets in Germany, leased to Deutsche Telekom, for a combined price of E333 million ($562 million).

Within the Asia-Pacific, Australians invested mostly in Hong Kong, with purchases such as Vicwood Plaza for $446 million and the Low Block of the Grand Millennium Plaza for $407 million, both bought by Macquarie Global Property Advisors.

The direction of Australian investment mirrored a global trend, as investors sought opportunities outside their home countries.

The survey found a 30 per cent increase in global direct real estate investment for the first half of 2006 compared with the corresponding period last year, with the amount reaching a record $US290 billion ($386 billion).

The report said the Americas, Europe and Asia-Pacific continued to see unprecedented levels of transactions with $US129 billion, $US117 billion and $US43 billion, respectively.

It said real estate markets continued to evolve as a global asset class, with cross-border investments now representing 44 per cent of the total volume - up 10 per cent on the first half in 2005. The firm forecasts that total transactions in commercial direct real estate investment could approach $US600 billion this year.

Japan accounted for 51 per cent of all Asia-Pacific transactions, with a further 40 per cent taking place in four major markets: Australia (12 per cent); China (11); Hong Kong (10); and Singapore (7).

With the exception of Australia, where scarce product and strong local demand was crowding out foreign players, cross-border activity rose strongly to $US13 billion in the Asia Pacific.