Global investments in properties are not expected to wane in 2016, with Sydney and Melbourne retaining their positions as the investment destinations of choice in Asia Pacific, a survey by the Asian Association for Investors in Non-listed Real Estate Vehicles (ANREV) has shown. According to its Investment Intentions Survey for 2016, global investors have expressed an intention to invest about $US57.9 billion ($82.4 billion) in properties globally, a number similar to last year. The average investor is targeting an allocation of about 10.3 per cent of their investment budget in property, just ahead of last year’s allocation of 9.4 per cent. Pension funds are the main investors and will be more aggressive in their investments than insurance companies, another big property investor.
More than half surveyed by ANREV said they would increase their investments in property in the next two years and are looking at investing in Europe first, then in the US followed by Asia Pacific. In Asia Pacific, Sydney and Melbourne are the hot favourites as investment destinations. Tokyo is also popular. “The Tokyo office market is again in top place as the most attractive investment-product combination, followed this year by Chinese Tier 1 cities-offices, which are tied in second place with Sydney-office…Interestingly, investment in China’s Tier 1 city offices has risen from eighth place in 2015 with 37 per cent of investors favouring this combination,” the survey says. “Mature markets in the region continue to attract most of the investor interest,” ANREV Director of Research and Professional Standards Amélie Delaunay said. “Despite some anxiety around China, it is surprising to see a renewed interest in the office market in China’s Tier 1 cities in 2016.”
China appetite still strong
Asia Pacific investors showed the most appetite for core investments. 70.3 per cent of surveyed investors said they would invest in non-listed funds in the Asia Pacific region as their preferred means to increase property investments, followed by joint ventures and club deals. Despite jitters in the Chinese sharemarkets, Australian experts expect continued interest in Australian property particularly from Chinese investors. “Our 2020 forecast for all Chinese international real estate investment, not just residential, is for $220 billion, which would be up more than four-fold from $52 billion in 2014,” Juwai.com co-founder Simon Henry said.
Mr Henry said in residential property, the Chinese will focus on Victoria and southeast Queensland, providing better value and being more affordable than NSW. In commercial investments by institutional players, CBRE expects about $US240 billon of trade between 2015 and 2020 with activity led by Chinese groups. “My view is Chinese investments will continue at the same level or more…the rockiness of the stock exchange will push more, not less, money out of China but it is off a low base for commercial investments whereas it is a high base for residential,” CBRE Senior Managing Director International Investments Richard Butler said. While Chinese institutional investments have favoured new residential developments in Australia, they have yet to make large investments in revenue producing commercial assets such as office buildings or retail properties.