This article is from the Australian Property Journal archive
MELBOURNE and Sydney have been named amongst the top 10 Asia Pacific destinations for international real estate capital.
According to CBRE’s 2023 Asia Pacific Investor Intentions Survey, which covers all asset classes, Melbourne joined Sydney as a top location for cross-border investment, moving into the number eight spot.
While Sydney maintained its fourth place position, behind only Tokyo, Singapore and Ho Chi Minh City.
These findings reaffirm ANREV’s Investment Intentions Survey which found Sydney and Melbourne surpassed Tokyo as the top spots for investment in the region, with Sydney at 86%, Melbourne at 83% and Tokyo at 66%.
The survey found that at 31%, nearly a third of investors plan to target opportunistic strategies in 2023, looking to make up for high financing costs through high returns.
This was followed by distressed assets and non-performing loans to take advantage of current market conditions.
“Despite healthy levels of fundraising, most investors are adopting a cautious approach as they look for signs of yield expansion and the interest rate tightening cycle to stabilise,” said Greg Hyland, head of capital markets, Asia Pacific at CBRE.
“We are expecting investment activity to accelerate in the second half of the year.”
While Tokyo was the most preferred target market for cross-border investment for the fourth consecutive year, Australia, Japan and Korea, registered the highest net buying intention, despite rising in 2022.
“While yields are expanding in Australia, the valuation impact may be more muted due to a pick-up in rental growth” said Sameer Chopra, head of Pacific research at CBRE Australia.
Regionally speaking, the industrial and logistics sector is still the preferred asset class for investors in the Asia Pacific, with office and residential following.
“While there is a drop in interest in office largely due to concerns about the current level of yields, the survey finds that core investors still opt for offices as their top choice. Investors are also showing much stronger interest in the residential sector, especially multifamily/built to rent,” said Henry Chin, global head of investor thought leadership & head of research, Asia Pacific at CBRE.
More than 60% of investors also reported to expect discounts across retail and A-grade offices in 2023.
While in logistics, only 11% of investors were willing to bid above asking price in 2023, this compared to 35% in 2022.
93% of institutional investors reported to expect allocations to real estate to either increase or remain stable in 2023.
While only 5% of investors responded with intentions of investing in alternative sectors, with data centres being overtaken for the first time by healthcare-related properties.
Around 60% of surveyed investors also plan to use ESG criteria when making investment decisions.
While 40% of investors are looking to delay their ESG adoption due to increased costs and current economic conditions.
Investors named fear of a recession, interest rate hikes and a mismatch in buyer and seller expectations as the greatest challenges facing 2023.
