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Surge in overseas investors buying commercial property in Oz

Foreign buyers accounted for 24.3% of all Australian commercial property transactions in 2010, the highest proportion since 1990. Last year saw a total of $12.7 billion in commercial property deals, the fourth highest ever.

The trend, revealed in a Real Estate Investment Flows report from consultants Jones Lang LaSalle report, shows that the strong Australian dollar has not proved to be a deterrent.

The report also shows that Australian investors sold $2.3 billion in offshore markets as portfolios were re-weighted.

‘What we are seeing is trends in buyer profile behaviour repeating back to the 1990s. In the early 90s we had a recession, which led to offshore investors and domestic institutions becoming more prominent, and that is happening again,’ said David Rees, JLL Australasian head of research and consulting.

‘This has been the greatest market downturn since then and we have seen a significant change in capital values. As the market tightens, real estate investment trusts become more active,’ he explained.

‘Australia has one of the most transparent real estate markets in the world and good financial regulation. This is appealing to foreign investors, as is our proximity and investment in Asia.
You can argue that the strong Australian dollar is a symptom of a strong economy. Some investors may argue it is a hurdle to investing, but offshore buyers seem to think otherwise,’ he added.

Meanwhile on the residential front the value of Australian capital city properties fell more than 1% in the three months to April, pulled down by losses in the luxury property market, the latest RP Data-Rismark home value index shows.

This covers the first quarter since a string of natural disasters hit the country in January. Over the year to April, dwellings in the most expensive capital city suburbs recorded a 5.4% loss, which helped drag down the overall market.

Home values in the middle 60% of suburbs were down 0.9%, while properties in the cheapest 20% of suburbs were the best performers, only losing 0.5%.

Perth led the decline, with seasonally adjusted house prices falling 3.1%. Sydney prices fell 0.5% and Melbourne was down 0.8%.