The Australian property market has, for many years, been a world leader. It was the first to establish a successful model for unlisted and listed property trusts.
This provided many smaller individual investors with an opportunity to participate in the ownership of major commercial property investments. The liquidity of the listed market provided the flexibility to hold or sell all, or a portion of their investment.
Sustainability agenda
Australia has driven and embraced the sustainability agenda. The substantial global benefits of environmentally sustainable residential and commercial buildings, has become a preferred option for investors.
Tenants’ occupancy costs and building outgoings are reduced, the health and wellbeing of employees enhanced, building property values can improve by up to 1% in the yield and tenants will stay longer in occupation. As for residential property, there is growing demand from purchasers for sustainable living accommodation
Stable construction
The construction industry in Australia is very stable. Our technology and disciplines are regularly exported to Asia, India and the Middle East. Due to the huge population in India, many cost and time saving measures are not used.
This is mainly due to the need to create jobs and reduce the otherwise substantial costs of funding a huge social program. Developers have demonstrated their ability to make significant cost savings through the skilled management of projects.
We offer the opportunity to add value to the Indian development market, through either joint ventures or engaging development managers from Australia.
Safe market
In the current market, bank funding of projects is far more constrained than in previous downturns. Opportunities exist for sovereign funds, high net worth investors and private investment groups.
They can engage with the major developers and construction companies joint venture debt & equity providers. Over the past 6 months, there has been a discernible increase in investment from Asia, India and the Middle East. Australia is seen as a safe market with secure capital and income growth.
Secure returns
Unlike many Australian investors and institutions, investors from India and Asia have a longer investment horizon. This approach has been the catalyst for secure returns and long term capital growth, as the market moves through cycles of 5-7 years. It is important for any investors seeking to have a long term investment in the Australian market, to engage with a credible partner with a solid track record and visionary market knowledge. In our view, significant profits can be attained from joint venture development opportunities.
Successful ventures
Provided the local partner has the financial capacity, and the skills to identify the best sites and understands the market supply and demand elements, such a venture will be very successful.
Many offshore investors supply the debt funding, while the local partner is responsible for the development, construction and leasing risks. On completion, the offshore investors can acquire the project, at a pre-agreed capitalization rate, as well as sharing in the development profit.
These opportunities are available in both commercial, residential and infrastructure projects.
Property investment highlights
Although rentals have reduced and values reduced in many sectors of the market, the underlying growth bodes well for the medium to long term. Undersupply in both residential & commercial sectors will not be satisfied for 3-5 years. Australia, particularly NSW, is the prime target market.
As confidence improves and the economy stabilizes, demand will strengthen. Those investors/developers with sites in growth sectors, prepared to spend the “extra upfront” costs to build five and six star sustainable buildings will be the winners over the next 10 years.
Source: investinaustralia.com
