Asian Investors Dominant Buying Force in Australian Real Estate
Hong Kong, January 23, 2014 — In 2013, real estate transaction volumes hit their highest level since 2005, totaling US$90.4 billion, a rise of 24.2% against full-year 2012 rates. The increase in volume was led by strong investment activity in Australia, China and Japan with these three markets each likewise recording their highest annual total since 2005. Japan was the standout performer with transaction volume surging a massive 110.5% year-on-year to US$23.7 billion thanks to the implementation of stimulus policies that boosted market sentiment. Australia and China grew by 35.5% and 17.9% year-on-year, respectively.
Led by Asia Pacific institutional and private investors, 2013 also saw more cross-border activity, which increased 48.3% year-on-year to US$18.7 billion. Notably, in Q4 2013 Australia recorded its highest quarterly levels of purchases by foreign investors since 2005. Asian investors dominated, making up 75% of the non-domestic buyers in Australia, with China, Malaysia and Singapore accounting for the majority of activity.
Japan likewise saw more activity from foreign property funds in Q4, which were particularly focused on buying office assets on the back of steady rising Grade A office rent. Foreign investors were also keen to invest in China. However, high asset prices and limited investable assets remained an obstacle to making direct real estate investments, though there was an increase in those using offshore platforms to make acquisitions and purchasing equity stakes.
Greg Penn, Managing Director for Capital Markets, Asia, at CBRE commented that “last year’s highs in investment volume and cross-border activity were driven by high levels of liquidity in the market, combined with factors like the low interest rates and investors’ desire to deploy capital in a way that secures recurring returns—all of which contributed to the increased activity in real estate.”
Western property funds remained net sellers in the market as some funds disposed of assets as they approached termination dates. However, some newly formed western property funds continued to invest in the region with most of the interest focused on Japan.
Australia, China and Japan all recorded a high volume of deals involving office assets over the year, with Japan seeing interest from a mix of domestic and foreign investors. Investors in Australia were largely foreign, while in China over 50% of the activity came from local players such as insurance companies and stated-owned enterprises. “Although there were a lot of deals in the office space in 2013, demand for high-quality modern logistics facilities is increasing due to comparatively better yields and modernization in the sector, particularly in countries like China, Japan and South Korea,” said Mr Penn. Investment turnover for industrial and logistics assets in 2013 increased 79% to US$13 billion, up from US$7.3 billion in 2012.
“Looking forward, we expect the Asia Pacific investment market to remain active in 2014, but investment volume is unlikely to increase significantly, as investors will become more apprehensive over high pricing, while the availability of assets for sale could act to constrain trades. Singapore and Japan offer more upside potential, however, particularly in the office sector, as both markets are expected to see strong occupier demand which will drive rental growth,” said Penn.
(The full Q4 2013 report will be available from mid-February. Please don’t hesitate to contact us for a copy.)
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
