Nick Browne, director of alternative asset management firm Jameson Capital, said offshore investors are very interested in Australian real estate due to the country’s strong response to contain Covid, bipartisan political and economic support for it. economy, a strong rule of law and a favorable investor environment. compared to other markets in the region.
âForeign investors are an important part of the mix thanks to the lack of financing alternatives in a market with limited capital market sophistication,â he said.
“The biases of domestic investors also tend to concentrate local capital in specific markets, creating excellent opportunities for foreign investors on a risk-adjusted basis.”
Browne says that next year investors will remain focused on the core business sectors of the office industry and retail, with a gradual reweighting from retail to industry and logistics.
“These are the largest and most liquid sectors with the most transactions and therefore attract the most capital,” he said.
âSome investors are also starting to realize that there is substantial value in non-traditional sectors such as student housing and rental buildings which have become very popular over the past decade.
“Some of these secondary sectors are extremely large asset classes in Europe and North America and foreign investors see the growth potential of these markets developing over the next decade in Australia.”
Browne also notes that more specialized opportunities that generate high returns are generally not popular with large capital distributors who lack in-house expertise.
But they are a priority for regional fund managers, private banks, multi-managers and offshore family offices.
When it comes to asset value, foreign investors, like all investors, look for relative value compared to other investment opportunities they are considering.
“If they don’t think the Australian real estate market is competitively priced compared to other markets in the region, they won’t be deploying capital in Australia.”
Jameson also does not expect foreign investment in Australia to distort prices in the market.
âPrice changes that do not reflect the underlying fundamentals of the market may be the result of investors allocating capital for reasons other than seeking purely financial returns.
âThis was recently seen in the middle of the last decade, when specific groups of foreign investors sought to move capital from their home market to Australia, resulting in higher price growth than might be expected. supported by national investors.
“The implementation of capital controls in some of these markets has significantly reduced the speed of these inflows into Australia.”
While nothing is certain in an upside down world, it will be interesting to see which assets are attracting interest from foreign investors this year.