A destination of choice
For those looking to grow their property portfolio internationally, Australia’s stable business environment and robust economy have created markets rich in opportunity.
More than ever before, Australia is an attractive destination for property investment. The number of international property investors in Australia has risen dramatically in recent years, as buyers from the likes of Asia, North America and the Middle East flock to our cities to capitalise on stable growth and high yields.
Statistics from the Australian Government show that in the past seven and a half years, international investors have increased their balance sheet exposure to Australia by $19 billion. The value of offshore property investment in Australia has grown by 43.7 per cent, from $51.9 billion in 2012-2013 to $74.6 billion, according to the Foreign Investment Review Board’s (FIRB) Annual Report 2013-14.
Now in its 24th year of growth, Australia’s strong profile is underpinned by its robust and open economy, low sovereign risk, a skilled workforce, transparent property markets and ready access to information. Investors seeking to diversify their portfolios are attracted to its mature property markets, which include both listed and unlisted assets across a range of sectors. In the current global climate, this means Australia can offer investors greater advantage in terms of safety and yield.
Melbourne and Sydney, which enjoy a reputation as ‘gateway cities’, have to date absorbed the bulk of commercial transactions involving international investors. According to research data for 2014/2015 by Colliers International, Sydney is the second most popular investment destination for Asian outbound capital, ahead of Manhattan, Shanghai, Tokyo and Beijing. For global investment capital, it currently ranks third, behind only London and Manhattan, and ahead of Shanghai and Paris.
Aside from strong market conditions, the biggest factor driving capital inflows in these capital cities is their high yields for commercial property, which sit well above those of comparative markets in the Asia Pacific.
Other factors include the significant opportunities for converting office buildings into residential use, and a growing local economy boosted by overseas residents. Unbeknownst to many, Australia sits alongside the UK and Germany as a top three player in the Vocational Education and Training (VET) area. Australian universities being well regarded in the Asia Pacific means that the high volume of post-secondary students will continue to underpin demand for new build investments.
In the residential sector, international investment represents a small but vital part of the market, which indicators show is growing rapidly after a few years on the decline. The available data, while incomplete, suggests that residential properties purchased by international investors are concentrated in new rather than established dwellings, which are located frequently in the inner-city areas of Sydney and Melbourne. For investors, one of the most appealing points of inner city developments is the high quality liveability and public transport services, which keeps upward pressure on property prices and ensures good returns.
It is no accident that Australian cities, according to official statistics, often take credit for the bulk of the nation’s population growth. The combination of factors that underlie the liveability of Australian cities – infrastructure, culture, environment, healthcare and education – are well known and often showcased in international rankings. Melbourne was recently crowned the World’s Most Liveable City out of 140 contenders for the fifth year in a row, with three other Australian cities – Adelaide, Sydney and Perth, also featuring in the top ten.
For these reasons and more, Australia has become an appealing destination for international investors looking for stability, good rental yields and growth. As leading Australian advocates for the property and construction industry, the Property Council is committed to protecting and developing the factors that enhance Australia’s reputation as an international capital market. For more information about our work, visit www.propertycouncil.com.au.