Melbourne trumps Sydney on Asia-Pacific investor wishlist
Melbourne is the top location for commercial property investors in Australia toppling Sydney as the preferred destination, according to a new survey.
The CBRE 2018 Asia Pacific Investor Intentions Survey revealed the Victorian capital is ranked second in the region among global investors.
It was narrowly beaten by Tokyo, which has hit the number one spot after Sydney fell from the top of the list last year to rank sixth.
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CBRE research director Bradley Speers says Melbourne’s growing popularity is being fuelled mainly by overseas investors looking to diversify.
“With yields reaching the bottom of the compression cycle in many markets, including Sydney, investors are more focused on rental growth for achieving capital growth, and diversification as a means of reducing portfolio risk,” Speers says.
“Some investment focus has shifted from Sydney to Melbourne, this is mainly Asian based, with Australian respondents surveyed still showing a preference for the New South Wales capital as a destination for capital.”
CBRE senior managing director of capital markets, Mark Coster, backs the trend, saying Melbourne has certain characteristics that are making it hot property, including stock availability and capital appreciation.
“Investment interest in Melbourne is underpinned by its income growth story – with strong rental uplifts forecast across all sectors over the next two – three years,’’ Coster says.
“This is driving capital growth and combined with continued yield compression in most parts of the market.”
More than 350 respondents participated in the survey, nominating their preferred investment locations.
CBRE’s findings also reveal Asia Pacific investors are less concerned about global and regional economic shocks but are showing ongoing apprehension about property prices.
However, the mood is unlikely to impact market activity, with 90% of the survey respondents reporting continuing strong intentions for 2018 following transactions hitting a record high of US$83.4 billion last year.
Real estate fund managers ae showing particularly strong intentions to purchase more with approximately US$53 billion of private equity capital forecast for in Asia Pacific real estate by 2020.
Other cities ranking highly in the Asia Pacific region include Singapore and Shanghai, while global investors are showing increasing appetite for Brisbane which climbed to eighth position, up from tenth in 2017.
Global investors’ top 10
5. China tier 2 and 3 cities
7. Japan regional cities
9. Hong Kong