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PwC: Australia tops real estate

By Rob Starr, Content Manager,

According to PwC’s Emerging Trends in Real Estate Asia Pacific 2013, if you strip out Hong Kong money going into China and vice versa and a big logistics deal in Japan, Australia absorbed more international real estate investment than any other market in the region thanks to its exposure to China, high-quality stock, continued economic growth and high yields.

Mr Dunning said offshore interest was underpinning the local market’s strength as domestically, capital was in short supply and local investors continued to remain cautious.

“The Sydney office market will continue to experience a shortage of new supply until 2015, which is expected to keep upward pressure on prices. But it is a difficult market for converting lease enquiries, which may ease this pressure where significant lease expiries are impending.

“Melbourne’s position is more challenging with new stock entering the market in the next two years, which will put pressure on rental growth.”

For the Asia Pacific as a whole, steady economic growth, rising incomes, and stable or increasing property values are contributing to an overall sense of optimism. However, this is tempered by growing concerns among investors that prime assets in key real estate markets are becoming overpriced. For instance, capitalisation rates across Asia remain more compressed than in many western markets, and yields for core office stock in cities such as Beijing, Hong Kong and Singapore are returning as little as two percent.

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