July 24, 2012 / 5:40 AM / 5 years ago

Australia property draws foreign capital seeking security-CBRE

SYDNEY, July 24 (Reuters) - Australia was the most popular property investment destination for non-Asian investors, and the third most active investment Asia Pacific market over the past year as investors sought secure, quality assets in a mature market, CBRE said on Tuesday.

In the year to June, Australia had property investment turnover of $10.8 billion, third after Japan, the largest investment market in the region with $13.6 billion in turnover and China which saw $11.8 billion of investment turnover.

While transactions in Japan were largely dominated by domestic players and those in China were mainly driven by Hong Kong-based investors, Australia saw a chunk of foreign capital coming in, said Nick Axford, CBRE’s head of Asia Pacific research.

“A third of all of the money that has come into Asia Pacific over the last 12 months from outside the region has been focused here in Australia,” Axford told the company’s market outlook presentation.

Last year, foreign investors bought about 30 percent of all the commercial properties sold, beefing up their presence here.

Investment yields on prime office buildings in Sydney stood at more than 6 percent compared with around 5 percent in London and New York, according to CBRE.

“Investors are looking for some kind of security. They want good quality products in good liquid markets,” Axford said.

“We will continue to see investors looking very closely at Australia,” he added.

Robert Sewell, CBRE’s regional director for institutional investment, said as prime office buildings in Sydney were getting scarce and competition from domestic players was heating up, foreign investors may have to look at secondary office assets.

“Last year, we saw REITs selling assets to fund share buybacks. They stopped doing this and now they now acquire stock,” he told the meeting. “The focus will be very much in the secondary market.”

Many Australia real estate investment trusts (REITs) divested assets to strengthen their balance sheets and finance share buybacks. Stockland sold A$795 million of assets during the first half of fiscal year to June 2012, mostly office assets.

Reporting by Eriko Amaha; Editing by Eric Meijer

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