As the Chinese stock market experiences wild swings and corrections and as the US economy still looks shaky, there are many who are nervous about a potential market crash and the fall out this would mean for Australia. There’s no doubt the global economy is currently in a fragile state. However, the intentions of overseas investors are very clear. They are still firmly set on investing in Australia.
The latest ANREV survey (Asian Asian Association for Investors in Nonlisted Real Estate Vehicles) has found that the top three investment destinations for 2016 in the Asia Pacific are Tokyo, Sydney and Melbourne, in that order. Global investors from the Asia Pacific have anticipated spending US$57.9 billion in 2016. This is not too different from the spending of last year. Furthermore Colliers International have described 2016 as “the year of real estate”. They list Sydney as one of the global gateway cities as high in the sights of investors over the next 12 months (other global gateway cities include London and San Francisco).
In fact, the nervousness about global share markets has helped to make real estate investment stronger. Forbes magazine argues that the volatility surrounding the markets makes property the one stable, liquid investment for this coming year. For the nervous global investor with a tonne of cash, putting their capital in a stable, long term growth investment like Australian property makes a lot of sense. The ANREV survey also found that the need for diversification played a major part in the investors’ enthusiasm for property investment.
Outlook for local investors
What does this mean for local investors? It doesn’t necessarily mean increased competition. As we’ve previously pointed out, global investors are really swimming in very different lanes to local investors. The kinds of properties they target are quite different. Recent government rulings on overseas investment have also ensured they are not overwhelming the local market. Overseas investors keep the construction industry buoyant and ensure that housing prices continue to rise, thus helping capital growth.
Last year overseas investors pushed commercial property sales in Australia to a record $28.4 billion, most of this being in office spaces and retail properties.
Australia, with its low dollar and affordable housing, is very attractive to global investors. While some of the major lenders have removed some of the incentives for property investors, the will to invest is still clearly there, as the ANREV study shows. It’s not just residential. The returns in Australia are still considered far stronger than other comparable areas, with Sydney seen as having one of the best returns for a gateway global city.
Interest from overseas buyers
Already in January, a Hong Kong based developer, China Overseas Holdings, has entered the Australian property market in style – with an $80 million purchase of a residential development site in Macquarie Park, Sydney. It’s not just the big two of Sydney and Melbourne, as interest in other cities and centres continues unabated. For instance, China Investment Corporation bought one major Brisbane office space – Cathedral Square – for a cool $150 million.
So the global hunger for Australian property that helped keep the local market bubbling for much of 2015 looks highly likely to continue in 2016. We can see that global investment helps drive local investment. So if you’re considering entering this highly rewarding market come and talk to us today.