Wednesday, 14 February 2018

Offshore commercial property buyers falter in local market:

Offshore buyers have become less active in the Australian market as yields hit a new low. Peter Braig by Nick Lenaghan

Major Australian commercial property deals fell by 10 per cent to $31.1 billion in 2017 as offshore buyers spent less in the market overall.
The 2017 transaction figures from Real Capital Analytics show that cross-border investors have started to recycle the capital they had placed in Australian assets after a four-year surge of capital inflows.

Cross-border acquisitions declined by 35 per cent year-on-year in 2017 to $10.4 billion, on RCA figures.
Even so, US, Canadian and Malaysian groups were the only net sellers in the market.

Singaporean players were the main investors, spending $3.2 billion. And despite Chinese cross-border acquisitions declining 61 per cent - as China's capital controls start to bite - they were still net buyers.

Overall, the Asia Pacific region recorded record investment in income-producing commercial real estate last year.
Busy markets in Hong Kong, Singapore and South Korea lifted the 2017 tally to $US157.5 billion worth of transactions.
That represents a 6 per cent increase on the preceding year and beats the previous high in 2015 by 2 per cent, according to the RCA analysis.
In Australia, overall transactions fell despite a strong final quarter of 2017.

Average office and retail yields compressed to a new low which may have deterred some investors.
Average yields dropped by 20 basis points in Sydney and by 15 basis points in Melbourne over the final quarter of 2017.
Property trusts such as Charter Hall, Dexus and GPT, became net buyers again in 2017.
"Investors faced a fully-priced, highly competitive environment in 2017," said Petra Blazkova, RCA's senior director of analytics for the Asia Pacific.

"Property yields hovered at their historic lows in markets such as Japan, South Korea and Hong Kong or compressed to new lows as in Australia and Singapore.
"With growth feeding through into rents and the likelihood that interest rates will not rise dramatically in the imminent future, we can expect to see a continued yet muted compression in yields as we move into 2018."
In terms of metro markets, Hong Kong has the title as the largest Asia Pacific commercial real estate investment market in 2017, overtaking Tokyo which had held the top spot for a decade.
"Scarcity of land, excess capital sitting on balance sheets of domestic buyers as well as a flood of capital from mainland China have pushed both volumes and pricing to record levels in Hong Kong," Ms Blazkova said.

Australian cities dropped in the rankings as record prices left buyers and sellers at an impasse, according to RCA.
Sydney suffered a 21 per cent decline in volume, while Melbourne recovered slightly in the second half of the year to record a 12 per cent year-on-year decline.
Among the Australian cities, only Brisbane showed positive annual change in activity and was ranked as the tenth most metro market.

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