Commercial real estate remains the apple of the eye of foreign investors

The latest data from the Foreign Investment Review Board (FIRB) showed there were 862 business investment proposals totaling $82 billion in 2020-21.

The figures indicate a 95.91% annual increase in requests from the $43.2 billion and 422 proposals the previous year.

According to Ray White, the high uncertainty that usually precedes political events such as elections has yet to show up in trading markets.

“Overseas buyers continue to be active in both buying and selling commercial assets with early signs that this trend is set to continue despite the election and its outcome,” the leading real estate agency noted.

He also pointed out that while discussions about other factors that could affect the market – including the state of the economy, inflation, as well as fundamental changes in the post-COVID-19 environment – will intensify over the next few weeks, none of these will. confusing buyers and sellers in the sector.

However, he acknowledged that investors would be keeping an eye on the Reserve Bank of Australia’s cash rate decisions and their potential impact on buyer sentiment.

“While [the] the focus has been on interest rates and their expected upward move, this will dampen activity for some buyers, notably retail investors and buyers of self-managed super funds who have increased their spending over the past 18 months “said the agency.

But in the long term, this should not disrupt the sector’s strong cash flows. “While this small end of the market may experience a period of moderation to return to more normalized levels of activity, the abundance of cash-rich investors and trusts, larger funds, as well as the deep pockets of overseas buyers , will see continued strong investment in commercial property this year,” he said.

The regulator’s report also comes in the wake of the the first-ever fine to be imposed under the country’s new foreign investment rules.

NSW and Victoria are becoming the darlings of foreign investors

NSW and Victoria were crowd favorites among overseas investors, receiving 22.8% and 10.13% of total investment respectively.

Ray White noted that commercial investments continue to be heavily biased towards central business district office markets due to their globally competitive returns.

“The current uncertainty, particularly in the CBD office markets, around occupancy and rents is not a deterrent to those buyers who consider the yields on offer to remain competitive with other international markets, while the safety and vibrancy of our global cities is a strong indicator of confidence and future growth,” he explained.

The FIRB report also showed growing foreign interest in commercial properties in Queensland, with the state taking 3.5% of total foreign investment in the previous financial year.

Greater interest in the Queensland market has stemmed from strong population gains, particularly in the SEQ, while the announcement of the 2032 Olympics will do much to raise the profile of the state in the years to come and drive a greatest interest,” said Ray White.

The top five countries seeking to invest in the country were the United States ($20.8 million), Singapore ($13.8 million), Germany ($7.5 million), Canada (7 .3 million) and China ($6.3 million).

While the United States remains the largest investor, followed by Singapore, Ray White pointed out that Germany’s stake in Australia’s real estate sector had increased after a period of pause in transactions, particularly in the office and residential sectors. industry.

Commenting further on the data, Ray White said Canada’s interests continue to be supported by major pension funds. On the other hand, China has reduced its presence in the sector due to a reduction in FIRB development applications.

Analyzing trading trends in the first months of 2022, Ray White also noted that Asian investor interest has returned and is beginning to show green shoots of recovery, while American, Canadian and European buyers stayed the course and continued to transact.

Commercial real estate remains the apple of the eye of foreign investors

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Last update: April 22, 2022

Posted: April 22, 2022