Colliers International, Australia’s property sector will see a return to more positive conditions in leasing markets and further confidence in the investment market in 2014.
Colliers International Chief Executive Officer, Australia and New Zealand, John Kenny said strong investment conditions had been the defining feature of the Australian property market in 2013, with Australian property continuing to attract increasing capital from both Australian and offshore investors.
“Our market has been considered a safe haven with low interest rates and attractive yields continuing to attract international investors and providing solid investment conditions for local investors", said Mr Kenny.
Colliers International found that heading into 2014 there are a number of factors which will lead to continued confidence in the investment proper markets and an improvement in demand for business premises across office, retail and industrial and will have high employment impacts.
“This includes an ongoing improvement in global conditions, the strong recent return of confidence in the housing market and increasing business confidence on the back of improvements to consumer confidence", said Mr Kenny.
“As consumers begin to move away from high levels of cautiousness and move to increasing their spending, this is likely to lead to greater business activity and higher levels of business investment.”
Nerida Conisbee, Colliers International National Director of Research, said 2014 would see a continuing shift in buyer profile within Australia’s property market.
Ms Conisbee found that the offshore investors have been experiencing the strongest growth over the past five years and in 2012 accounted for more than half of all direct purchases by volume. In 2012 local investors re-entered the market and by November 2013 accounted for more than 70 per cent of total direct sales.
“By the end of October, this group accounted for $4.3billion of total transactions. This is higher than what was experienced in 2007 prior to the global economic downturn, and more than double the 2012 level" said Ms Conisbee.
Colliers International found that the improving conditions overseas have started to influence investment in Australian REITs and will directly impact property over the next 12 months.
“Earlier this year, there was a lot of offshore capital flowing in however at present, there appears to be a shift back to other markets, particularly the US and Europe,” Ms Conisbee said.
“Offshore buyers are, however, still active although there are a number of changes that are occurring to the types of buyers targeting Australia. The majority of offshore money has been coming from Singapore, Hong Kong, Europe and North America. Australia remains attractive and in some ways is becoming more so for a new emerging group of investors.”
Colliers International also found that the key player of international investing was China and large capital also coming from South Korea.
“Chinese investors have been very active in the residential space this year and this trend is now starting to spill into the commercial property market,” Ms Consibee said.
“In 2013 the amount of Chinese direct investment in commercial property stands at $871million (to the end of November), which represents a rapid increase from 2007 when just $17million was recorded. This was boosted significantly by the sale of Centennial Plaza in Sydney in November which was one of several transactions completed that month involving a Chinese purchaser.”
Colliers International saw significant Chinese purchases in Australia during 2013. These sales include; Centennial Plaza (260, 280 and 300 Elizabeth Street, Sydney): Sold on behalf of Investa Property Group to Invesco (on behalf of Chinese Investment Corporation), for $305 million. The largest direct property transaction in the Sydney CBD this year, which was brokered by Colliers International, and; 229-234 Franklin Street, Melbourne: Sold for $17 million to a private Chinese investor by Colliers International on behalf of Jimmy Goh.
It was primarily privately-owned companies and private investor groups that had risen significantly, including HNA Group, Ridong Group, Dongrun Investment Group and Maville Group.
“We can expect to hear more of these groups over the next decade as changes to regulations surrounding investment into property by Chinese investors is expected to lead to significant amounts of capital entering Australia.
“We are also seeing waves of capital from South Korea, where the nation’s huge pension system is actively investing in property globally.
“It is likely that pension funds will continue to increase their investment in Australian property, both local superannuation funds, and offshore groups. Malaysian investors are also expected to become more active, particularly from the huge amounts of personal wealth in that country.”
Colliers International forecasts for leasing markets in 2014 were cautiously optimistic as the improved business confidence and better economic conditions offshore will improve the housing market and return consumer confidence and will see a recovery in rent across all sectors.