Singaporeans lead investment in Australia

Australian real estate hits the spot as Singaporean capital flows Down Under

19 novembre 2019

Singaporean groups have been the most active offshore investors in the Australian office market in 2019, as attractive yields and a relatively low dollar draw record volumes of capital to Australia.

Singaporean investors accounted for 30 percent of all offshore purchases in Australia in the year to October, amounting to AU$3.07 billion - the second highest year on record.

The data, from JLL and Real Capital Analytics, relates to transactions over AU$10 million.

Australia presents an attractive option, says Stuart McCann, Head of International Capital – Australia, JLL.

“Singaporean REITs have shifted from share buy-backs and company mergers and acquisitions, to active capital raising. This is off the back of low bond yields and a run on share prices, which has helped reduce their cost of capital to competitive levels in Australia,” he says.

Over the past two years, Singapore has itself witnessed an influx of capital, further driving domestic investors overseas in search of value amid growing competition at home.

But it’s not just Singaporeans looking to Australia. Overseas capital accounted for a record AU$10.25 billion of office, retail and industrial purchases in the year to October.

Singapore, the United States, Hong Kong and Canada make up the bulk of offshore investment into Australia.

While demand for real estate globally is unprecedented, deployment is increasingly challenging; global dry powder stands at a record US$330 billion.

Record low bond yields and cheaper debt mean Australian office markets offer the highest cash-on-cash yields of any of the core and mature gateway office markets in Asia Pacific,” says McCann.

Offices the ticket

Offices have accounted for 66 percent of all foreign investment in Australia over the year.

Forecast rental growth plus strong liquidity and transparency in the Australian market, makes the sector attractive, says Camilla Bradley, Director – International Capital, JLL.

“We’ve seen low vacancy rates and supply, particularly in Sydney and Melbourne, driving rental growth, with investors looking to place their capital directly, as well as through local managers,” she says. “We expect this demand to continue with yields remaining attractive relative to other global cities. The weight of capital in the market, favourable hedging costs, a lower cost of debt, as well as an outlook for low Australian Dollar, will contribute to further rate compression and increased investment levels in the sector.

Singapore buyers

The demand from Singapore is unlikely to let up as we look to 2020, says McCann.

“Major developers and corporations, as well as government-linked corporations, and REITs are all expected to be active in Australia in the next 12 months.”

Singaporean sovereign wealth fund GIC has been public about its ongoing commitment to add quality long-term product to Australia.

It was recently involved in one of the year’s biggest deals with the acquisition of a 25.1 percent stake in the waterfront office precinct, Barangaroo, in Sydney, from Australia’s Lendlease and Canada’s CPPIB. The purchase was on the back of GIC’s sale of a 49.9 percent stake in Sydney’s iconic Chifley Tower for AU$920 million.