Australia as ‘Island of Stability’ for Investors

Europe presents a demographic risk, as well as a political one with war on their doorstep, while the US is experiencing political tension and the growing likelihood of a recession.

Australia has only experienced two recessions in the past 35 years, whereas other markets have seen between four and six recessions—the reason being it has got a lot of active stabilizers, shock absorbers that work very well in a downturn.

Looking ahead, investors are increasingly looking to Australia as a preferred location for global capital, according to MaxCap head of direct investment Simon Hulett.

Every rate cut improves building approvals by about 2.5 per cent. That’s quite a substantial uplift in activity. Lower rates are very supportive of housing prices for this year and the next year, good news for developers.

Industrial and to a lesser extent office had also been the beneficiary of improved investor sentiment in the Australian market. In terms of the equity world, the returns are starting to come back. Retail shopping mall equity returns have improved the most.

Riverlee development director David Lee said Australia offered stability and strong core returns. “Historically, Australia has not been a prime market. If you look at other international cities, core returns are lower than what you find here. But we are seen as a safe economy here, with stable returns, and stability is attractive. We will be seeing Melbourne and Sydney CBD cap-rates sharpen over time and we will be ranked amongst the other major international cities.”