“Unprecedented” 60% surge in foreign investment in Australian commercial property

A 60% surge of the funds outlaid by foreign investors for Australian commercial property has been recorded, with $5.9 billion spent in the last financial year, according to Savills Australia.

In the 12 months prior the funds totalled $3.5 billion.

Savills’ national head of research Tony Crabb said that the current figures are “unprecedented” and there's more to come.

Asian investors totalled $3.9 billion, or 67%. Meanwhile, North Americans and Europeans made their presence felt, with 18% and 15% of the spend respectively.

“The last 12 months buying activity is off the charts as far as recent history is concerned. It is almost as if they have been dipping their toe in the water, they like the temperature and now they are just diving right in,’’ Crabb said.

Australia’s reputation for stability, both in terms of the political and economic climates, remain the typical drivers according to Crabb.

“What has happened in the last 12 months for foreign investors is that circumstances at home are not as attractive in terms of returns – official interest rates are well below Australia’s - political and economic conditions may not be as stable, and property investment markets may not be as mature as Australia’s including restrictions on domestic investment,” he explained.

“In order to maintain growth and dynamism, companies, developers and investors are increasingly turning overseas to find new opportunities”.

Currently, 84% of foreign purchases are occurring in office markets, with 14% buying retail and 2% industrial. Asian investors make up two thirds of the spend in office markets. In total, foreign investors accounted for nearly 50% of CBD office market transactions in the last 12 months.