Overseas Property Investment Soars

Overseas Property Investment Soars

Australian property investors are sending huge amounts of investment offshore in search of higher returns and diversified portfolios.

Research conducted by real estate money management firm Jones Lang LaSalle found that Australian investors poured a whopping $US5.3 billion ($A7.06 billion) into overseas real estate in the first half of this year, up from only $US1.2 billion ($A1.6 billion) in the first half of 2005.

Jones Lang LaSalle head of forecasting services John Sears said an increase in the amount of superannuation allocated to listed property trusts (LPT) was largely driving the flight overseas, with LPTs seeking to diversify their portfolios and capitalise on high overseas yields.

“There’s a huge amount of money flowing into LPTs and they need to find stock,” he said.

“Because there’s so much money, there’s a lack of stock available in Australia.

“LPTs are traditionally seen as a high yielding asset … So to get the yields, they have to look overseas.”

As a result, Australia is now the third largest international investor in property after the United States and the Middle East.

The company’s Australian head of research Kathryn Matthews said around 80 per cent of the funds spent overseas in the first half of 2006 were invested in countries outside the Asia Pacific region, particularly in the US.

“The US received almost half of our overseas purchases, making Australians the third largest cross border investors in the US,” she said.

However, Ms Matthews said Australians were increasingly interested in European markets.

“Australians invested particularly heavily in Germany where they purchased around $US1 billion ($A1.33 billion) worth of assets in the first half of 2006,” she said.

Germany accounted for 19 per cent of Australian offshore property investment in the first six months of this year, followed by Belgium with six per cent, the United Kingdom with three per cent, Poland and the Netherlands with two per cent each, and France with one per cent.

Mr Sears said the rising interest in investing in Germany was a result of the county’s relatively high yields for the European region coupled with low interest rates, which made borrowing money to invest in the country cheaper.

Within the Asia Pacific, Hong Kong attracted 12 per cent of Australian investment, followed by Macau with four per cent, and South Korea and New Zealand with two per cent each.

But despite the large fund outflows from Australia, the local market was not forgotten with direct real estate investment rising seven per cent during the period.

Direct real estate investment in Australia reached about $US4.8 billion ($A6.4 billion) in the first half of this year, and stood at $US9.1 billion ($A12.12 billion) in the 12 months to June 2006.

Source: The Age