The Australian Investment Showcase is back…and there’s a new destination which has everyone talking.
For the fifth year in a row the Investment Services and Asia Markets team will be setting off on the Australian Investment Showcase, visiting Singapore, Hong Kong, Macau and for the first time ever – Hanoi and Ho Chi Minh in Vietnam. Each destination on the showcase is strategically chosen to align with the current wave of inbound capital. With the capital constraints out of mainland China, we have seen an influx of new entrants from jurisdictions which had previously only had minor investment in the Australian market. And whilst Singapore and Hong Kong continue to invest into Australia year on year, over the past three years we have seen a rise in first movers from Macau and Vietnam.
Investment in the Australian Property Market
During the 2018 financial year, investors from Singapore, Hong Kong, Macau and Vietnam purchased a total of $5.04 billion worth of Australian Real Estate. Over the past 5 years, investment from these countries has increased by 44% in total or 8.8% on average per annum. This represents an increase of 3.5% year over year.
Where has this capital come from?
Singapore still continues to be largest source of offshore capital amongst these countries and over the past 5 years, it accounted for 75% of the total investment placement out of these four locations. Followed by Hong Kong which accounted for 23% and the remainder is shared between Macau (1%) and Vietnam (1%). The rise of investment from these countries also coincided with the surge in the number of Significant Investor Visa holders from these countries. There are several factors that have contributed to this trend, including:
- Political and economic stability,
- Attractive pricing relative to their home countries,
- Clear rules of ownership and market transparency,
- Low AUD to USD and major Asian currencies Low inflation compared to their home countries.
What type of investors are they?
While Singaporean investors are mostly institutions or listed groups, buyers from Hong Kong, Macau and Vietnam are predominately privates and High-Net-Worth individuals. Listed companies and institutional investors, particularly from Singapore, have accounted for much of the investment in value terms (74%) over the past 5 years. They’re followed by privates who have acquired close to a quarter (24%) of the total value.
What did they buy?
Office is the most common type of assets for these offshore investors. Almost half (46%) of the total investment from these countries was placed into office buildings. Offshore investors were attracted to the office market due to its positive outlook for rental appreciation, low risk and easy to manage. The Australian office market is experiencing strong growth in office space demand and a severe lack of supply, particularly for the east coast CBD markets of Sydney, Melbourne and Brisbane. Vacancy is currently sitting at historic low levels. The market is also seeing demand cascading to secondary and suburban locations such as North Sydney, Parramatta in Sydney, St Kilda Road in Melbourne and metropolitan markets in Brisbane due to the attractive pricing. Offshore demand for industrial properties (17%) is also on the rise as the sector offers attractive value proposition due to the strong growth of e-commerce and logistics demand. Online retailing in Australia has been growing by circa 35% over the past few years and now accounts for over 5% of the total retail sale volume. Industrial properties with long WALEs and located within proximity to transport and arterial thoroughfares are highly attractive to investors. Other important asset classes include development sites (12%), hotels (12%) and retail (10%). Despite the recent slowdown in housing prices. Offshore interest remains undeterred with many investors recognising the opportunity to land bank for future developments, with particular interest in income producing development sites.
Where did they buy?
Over the past 5 years capital from Asia has increased significantly; initially the majority of this investment was destined for Sydney and Melbourne, however as familiarity with the individual Australian markets has increased we have seen a number of investors enter the Brisbane, Adelaide, Perth and certain major regional markets such as Wollongong, the Gold Coast and Far North Queensland.
The rise of Macau
Since their noticeable entrance into the market in 2016, Macau investors have accounted for over $500 million, with large privately – owned enterprises (POE) leading the way. As predicted, it wasn’t long before ‘herd mentality’ eventuated and similar groups started to consider Australia as a viable option for their real estate investment mandates. The Asia Markets team were not only receptive to this movement, but nimble and actively targeted offshore groups by adding Macau to the 2018 showcase. Throughout the trip, the team formed invaluable relationships with major POE’s and high net-worth clients and as a result facilitated the introduction of Dayfull Group to the Australian market. Their first major acquisition was on Melbourne’s South Bank in early 2017 where they purchased the ExxonMobil office building for $160m. Unlike most first movers who tend to familiarise themselves with one market before expanding interstate, Dayfull Group valued our expertise and the opportunities we presented them, which resulted in the purchase retail asset – Soul Boardwalk on the Gold Coast for $90m. Later that year we also transacted their largest investment to date, 179 Elizabeth Street Sydney an office asset which they purchased for $265m.
AIS has always been our point of difference in the market. Our global reach and longstanding relationships with over 700 offshore buyer groups has seen us generate over $3billon worth of Australian investment opportunities.
Vietnam: the destination to watch for the 2019 Australian Investment showcase
For the first time, the Australian Investment Showcase is adding Vietnam to its itinerary. Vietnamese investors have been sporadically investing over the last 2 years, with New South Wales, Victoria and Queensland their favoured destinations. Their entrance into the market aligns with an increase in visa allocations from the Australian Government whereby overseas business investors have been welcomed into the country to invest and stay permanently via the Business Innovation and Investment (Permanent) Visa schemes including; Visa subclass 188A, 188B, 188C and 132A. From 2015 to 2018, Vietnamese visa submissions increased by 177%, which in turn saw a total of circa $300,000,000 being directly invested into commercial real estate in Australia from the new market entrants. And whilst they tended to favour the residential market, many have now moved to commercial. Notable movement has taken place across all major asset classes including; Office, Retail, Premium Investments, Rural and Development sites. In early 2016 Vingroup, chaired by Mr Vuong Pham (the brother of Vietnam’s only acclaimed billionaire), made what is believed to be the first major Vietnamese investment into the North Australian beef sector for a total of $18m and Sydney CBD redevelopment site for $18.5 million. In the early months of 2019, another influential group, TH Group bought a portfolio of cattle stations in the Northern Territory and Western Australia from Consolidated Pastoral Company.