Flood of foreign investment into Australia continues

Vanguard August 2012 p. 10
Duncan B.

Overseas cash continues to flow into Australia despite the higher Australian dollar, according to a recent report by world-wide real estate company Colliers International.

During the last six months, more than $4 billion worth of property was bought with overseas capital, up from $3.8 billion in the first six months of last year. Large portfolio sales totalling $2.38 billion accounted for 59% of investment, up from$1.8 billion last year.

In the first half of 2012, overseas investments accounted for about half of all sales of assets valued above $30 million. In total, 58 assets valued at $2.8 billion were bought by overseas interests in the first half of 2012. Office blocks and hotels are among the most desired investments. $1.7 billion of off-shore capital was invested in NSW in the first half of the year. 47% went into hotels and a further 44% into offices. Office blocks in Victoria attracted 17% of off-shore investments into Australia in the first half of the year. Office asset transactions made up 78% of the foreign investment in Victoria, with hotels accounting for a further 20% ($487 and $124 million respectively)

Canadian interests account for 19% of all foreign property transactions, with about $750 million of investments made. The Canadian Public Sector Pension Investment Fund is a major investor, and is seeking to take a stake in the $6 billion Barangaroo South redevelopment project in Sydney.

Foreign investment in Australian agricultural land is also continuing unabated. A spokesman for Colliers International said “Australian agricultural land is quickly moving to the top of investors’ wish-list. It’s about food security, portfolio diversification and high net returns.”

More than $2 billion in equity commitments has been raised and another $2.5 billion is being raised for investment in agricultural land. Large scale dry and irrigated farming country and large high-rainfall grazing holdings are the most sought after, with opportunities also in forestry, wine and vineyards. This is coming at a time when, according to the Bureau of Statistics, the total value of Australia’s rural land has decreased for the first time in 20 years. Rural land was valued at $264.3 billion in June last year, dropping 12% on 2010.