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Cushman: Foreign investment declining in Australia

At the halfway point in the year, foreign investment in 2016 is down 30 percent year-on-year as sellers are reluctant to release stock, according to a report from the property services firm.

Overseas real estate transaction volumes in Australia are declining as investors find it difficult to get their hands on assets in core markets, a report from Cushman & Wakefield said.

The global property services firm's Australian Property Insights report revealed that in H1 foreign investment in Australia is down 30 percent year-on-year. Foreign investment had reached a peak in 2015 at A$15 billion ($11 billion; €10 billion), or 51 percent of Australian commercial real estate transaction volume.

Yet, while the figures are down the Cushman report said this is partly due to 2015 numbers being boosted by large portfolio deals including sovereign wealth fund CIC's $2.5 billion office portfolio and Ascendas-Singbridge's $1 billion industrial portfolio purchases. However, volumes have also declined due to limited investment opportunities.

However, the main reason for the decline in overall overseas transaction volumes is a reluctance by owners to release stock from core markets, such as Sydney and Melbourne. Offshore investors have been the dominant purchasers of Sydney central business district's commercial real estate and on average, 30 percent of their annual investment volume has been deployed into the Sydney CBD.

Yet, current property owners are reluctant to sell due to limited reinvestment opportunities and the expected uplift in office rents due to soft supply pipelines.