Australian Growth to Draw Overseas Property Buyers, CBRE Says...

Australian Growth to Draw Overseas Property Buyers, CBRE Says Share Business Exchange
By Nichola Saminather

Jan. 11 (Bloomberg) -- Australian commercial property sales to overseas buyers are set to increase by about a quarter in 2010 as international investors are lured by the nations economic growth, according to Kevin Stanley, head of research at CB Richard Ellis, the worlds largest real estate broker.

Overseas buyers will spend about A$2 billion ($1.9 billion) on Australian commercial real estate in 2010, up from about A$1.6 billion in 2009, he said. The South Korean National Pension Funds purchase of the Aurora Place Office Tower in Sydney for A$685 million on Dec. 30, the biggest deal in two years, shows overseas buyers continue to see strong prospects for the Australian market, Stanley said in a telephone interview.

It represents the strong interest from foreign investors in Australia, and that will continue into 2010, Stanley said.

The Australian economy skirted the global recession in 2009 and is forecast by the central bank to strengthen in 2010. Overseas investors bought almost a third of all commercial properties sold in Australia in 2009, six times the long-term annual average, according to yet-to-be published research by Stanley.

In the second half of 2009, offshore buyers spent about A$1.1 billion on Australian commercial real estate, up from about A$550 million in the second half of 2008, Stanley said.

Vacancy rates

Overseas investors looking for a steady and growing income stream will also be drawn by a strong rental market and long lease terms, Stanley said.

Vacancies in rental office properties in Australias capital city centers, now at 7.7 percent, will peak at 11 percent in 2010, according to J.P. Morgan Securities Australia Ltd., below the 1993 peak of almost 21 percent.

U.K. commercial property vacancies rose to 12.6 percent in the year ended Oct. 31 from a year ago, with falling rents and the possibility of loan defaults threatening the market, the Bank of England said in its Dec. 18 Financial Stability Report.

Retail vacancies in the U.S. will reach a record 12.9 percent in 2010, and the vacancy rate for the office market, at 16.1 percent at the end of the third quarter, will peak at 18.6 percent in 2010, CBRE said on Nov. 11.

Rates, currency

Increases in the Australian dollar, higher interest rates and competition from local buyers may slow the level of growth of overseas investments in 2010 to a more sustainable 20 percent of all buyers, Stanley said.

The Reserve Bank of Australia raised its benchmark lending rate three times in the last quarter to 3.75 percent, after cutting it to a historical low of 3 percent in April.

The Australian dollar, after gaining 27 percent against the U.S. dollar and 25 percent against the euro in 2009, will reach parity with the U.S. currency this year, some forecasters say.

Despite the more recent change in trading conditions, foreign interest in Australian real estate remains very high, especially from Europe and Asia, Stanley said.