Australia’s real estate market is considered an attractive source of sustainable yield, with Standard Life Investments suggesting investors should concentrate their investments in the domestic real estate market rather than overseas.
Australia was a perceived safe haven for global real estate investors due to transparency, liquidity and favourable underlying fundamentals in the market, Standard Life Investments head of real estate research and strategy Anne Breen said.
In the current economic climate, real estate investment should be considered as a source of sustainable yield within a mixed asset portfolio, Breen said.
“In the context of that, the Australian market looks very attractive, and for Australian funds we expect they will concentrate most on their domestic market initially in this cycle,” she said.
But she said that with the strength of the Australian dollar, it did beg the question, should Australian investors be looking overseas while they could benefit from currency exchange?
“But I think, given what is happening in global economies, Australian investors are still quite nervous,” she said.
“I think the domestic market looks very attractive so they don’t need to take that risk at this stage. It’s likely to happen, but maybe 12 to 18 months from now.”
During a period of historically low interest rates, income and yields were increasingly important for Australian and global real estate investors, she said.
“Income will remain a key focus for Australian and global investors in the years ahead,” she said.
“Equally, the unprecedented level of stimulus injected into global financial markets in 2011 and 2012 has raised inflation as a medium-term concern. Against this backdrop, investors can anticipate modest, if any, growth in rents and capital values.”
