Australian commercial property sales to overseas buyers are set to increase by about a quarter this year as international investors are lured by the nation’s economic growth, according to Kevin Stanley, head of research at CB Richard Ellis, the world’s largest real estate broker.
Overseas buyers will spend about A$2 billion (S$2.6 billion) on Australian commercial real estate this year, up from about A$1.6 billion last year, he said.
The South Korean National Pension Fund’s purchase of the Aurora Place Office Tower in Sydney for A$685 million on Dec 30, the biggest deal in two years, shows overseas buyers continue to see strong prospects for the Australian market, Mr Stanley said in a telephone interview.
The Australian economy skirted the global recession last year and is forecast by the central bank to strengthen this year.
Overseas investors bought almost a third of all commercial properties sold in Australia last year, six times the long-term annual average, according to yet-to-be published research by Mr Stanley.
In the second half of last year, offshore buyers spent about A$1.1 billion on Australian commercial real estate, up from about A$550 million in the second half of 2008, Mr Stanley said.
Overseas investors looking for a steady and growing income stream will also be drawn by a strong rental market and long lease terms, Mr Stanley said.
Vacancies in rental office properties in Australia’s capital city centres, now at 7.7 per cent, will peak at 11 per cent this year, according to JP Morgan Securities Australia Ltd, below the 1993 peak of almost 21 per cent.
UK commercial property vacancies rose to 12.6 per cent in the year ended Oct 31 from a year ago, with falling rents and the possibility of loan defaults threatening the market, the Bank of England said in its Dec 18 Financial Stability Report.
Retail vacancies in the US will reach a record 12.9 per cent this year, and the vacancy rate for the office market, at 16.1 per cent at the end of the third quarter, will peak at 18.6 per cent this year, CBRE said on Nov 11.
Increases in the Australian dollar, higher interest rates and competition from local buyers may slow the level of growth of overseas investments this year to a more sustainable 20 per cent of all buyers, said Mr Stanley.
The Reserve Bank of Australia raised its benchmark lending rate three times in the last quarter to 3.75 per cent, after cutting it to a historical low of 3 per cent in April.
The Australian dollar, after gaining 27 per cent against the US dollar and 25 per cent against the euro last year, will reach parity with the US currency this year, some forecasters say.
Source: Business Times, 12 Jan 2010
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