Melbourne pips Sydney as preferred destination for domestic property capital

Melbourne has overtaken Sydney as the preferred destination for Australian-based commercial property capital.

This is one of the outtakes from CBRE’s annual Australian Investors Intentions survey, which highlights that commercial sales activity in 2019 could eclipse last year.

CBRE’s Associate Director, Research, Ben Martin-Henry said investors had indicated that both buying and selling expectations were higher for 2019 than the previous year.

“If this ends up being the case then we can expect higher sales volumes, with 35% of investors surveyed indicating that they plan on increasing their divestment activities and 32% indicating they will be more acquisitive,” Mr Martin-Henry said

“The survey also highlights that Melbourne is the preferred destination for domestic capital, overtaking Sydney, as investors buy into the strong economic fundamentals that are driving rental growth.”

Of the Australian investors surveyed, 37% nominated Melbourne as their preferred market, up from just 20% last year and head of Sydney at 30%.

Mark Coster, Senior Managing Director of Capital Markets, also noted; “At a global level, the survey shows that buyers intending to invest outside their home market placed Australia at 3rd place on their list of preferred markets, behind the US and the UK and ahead of China, Japan and Germany.”

“In other shifts, industrial & logistics (I&L) has overtaken office as the most desirable sector for Australian investors in 2019. This follows the global trend, with I&L having been the most desirable sector for the past three years.”

Perth is also back on the Australian investor radar, with 10% of investors nominating the city as their preferred investment location (up from just 2% last year) due to the higher yields achievable relative to other markets.

While office investments were 2nd on the shopping list of Australian investors, only 29% of investors listed office as their preferred market sector, down from 45% last year.

The Build-to-rent (BTR)/Residential sector climbed to 3rd place, ahead of retail, as investors continue to investigate opportunities in the nascent Australian BTR asset class.

“At a macro level, investors intend to increase their weighting to value add and opportunistic investments and have a growing interest in alternative asset types, such as real estate debt and healthcare,” Mr Martin-Henry said.

“They also believe high asset pricing (75%) and a potential global economic shock (31%) are highest on the list of obstacles to invest in property and are the biggest potential threats to the market.”