Australian cities a commercial property gold mine: experts
The tide of global capital chasing commercial property in Australia could accelerate this year with key cities still seen as good value in the global context despite a series of blockbuster deals.
The market has been rocked by big-ticket purchases, including that of Sydney’s Exchange Centre for about $340 million, which has prompted caution in some quarters.
But Australia offers one of the highest yields for investors and is one of the last markets where investors are seeing capitalisation rate compression, Knight Frank head of capital markets, Asia-Pacific, Neil Brookes, told a Sydney seminar on Wednesday.
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While Sydney and Melbourne are still the preferred landing sites, the yield gap between property returns and bond yields remains high, particularly in the recovering Brisbane and Perth markets. Brookes notes that US interest rate increases are also putting downward pressure on the Australian dollar and tips debt costs will remain low in the short term.
We’re also seeing ultra-high-net-worth individuals beginning to participate in what was previously the domain of institutions
He acknowledges that rising bond yields may become an influence but expects Asian capital to maintain its lead in inbound investment as concerns about capital controls faded and Sydney’s office market emerges as a global standout for capital value growth.
Fellow panellist, UBS head of real estate, Australasia, Tim Church, argues that Australia will be in a low interest rate environment for an extended period as the bond rate stays low after a brief spike in the wake of the election of US President Donald Trump.
“We’re now not just seeing major institutional funds and sovereign wealth funds invest, we’re also seeing ultra-high-net-worth individuals beginning to participate in what was previously the domain of institutions,” he says.
This article originally appeared on www.theaustralian.com.au/property.
