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A look back: Ascendas-Singbridge

Australia attracted fewer foreign buyers in 2016, despite a stable economic and political environment that continues to make it an attractive place to invest, according to Jonathan Yap, CIO, Ascendas-Singbridge.

Compared to 2015, when multiple overseas real estate investors made well-publicized forays into Australia, foreign buyers were noticeably quieter in the country in 2016, said Ascendas-Singbridge’s chief investment officer, Jonathan Yap.

“We still see foreign investors in the market, but in the current cycle, pricing has gotten to a stage where you can’t just come in and buy and hold, you have to do some active management or discerning investment, and that’s where locals or investors with operating capabilities come in,” he said.

Yet, overseas investors would have done well if they put capital to work Down Under this year, as Australia currently is benefiting from solid real estate fundamentals and also a stable business environment, according to Yap.

“The key criticism that people have is that Australia’s economy is too dependent on mining. [But] Australia’s government released data showing that 2016 was the 25th year in a row with registered economic growth. Maybe the economy is expanding and [becoming] more diversified,” he said.

The Singapore-based real estate developer and fund manager struck its first office deal in Australia with the acquisition of a Sydney property in March. The firm acquired 100 Arthur Street, a Class A commercial building located in North Sydney business district, using capital from its pan-Asia office co-investment program.

“Australia comes across as a stable market, especially in light of other events around the world in 2016, from Brexit to the US election outcome. Australia comparably stood out very well,” said Yap.

“Demand remains strong and supply has been a little more constrained,” he noted. “Lending to real estate development has always been careful and that continues. At the same time, some supply is being taken off the market from developers [that] previously bought office buildings to convert into residential projects, and other developments have been disrupted because of infrastructure the government is constructing.”

But the absence of swathes of overseas capital has not made Australia a less competitive place to do business, as the domestic real estate players continue to have a strong appetite for property. During the first half of the year, domestic capital sources accounted for 66 percent of overall transaction volumes and became more active across a greater array of sectors and geographical markets, according to Cushman & Wakefield.