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Singaporean developers prefer prime office properties in Sydney and Melbourne over others due to their higher absolute yields and redevelopment potential, as well as the country’s transparent tax and legal framework.
These are the findings drawn from CIMB’s interviews with three local property players and an Australian Real Estate Investment Trust (A-REIT) involved in the office market.
The financial institution also noted that the country’s office sector is enjoying robust demand, which is driving cap rate compression among its major cities. As matter of fact, most of the interviewees expect cap rates to contract by another 50 basis points (bps).
However, these firms believe that foreign buyers without a domestic management platform have limited capability to enhance the value of their properties in Australia, or they may encounter difficulty in doing so.
In addition, Sydney and Melbourne’s rental markets are more vibrant than those in Perth and Brisbane based on current market observations, added CIMB.
Moving forward, Australia’s rental growth is expected strengthen in 2015 to 2017, especially in Sydney, Melbourne and Adelaide due to their supportive demand and historically low supply, said JLL.
On the other hand, JLL noted that Perth could struggle because of its patchy demand and high supply.
Image: Sydney Skyline, (Source: Wikimedia Commons, Beau Giles)
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this and other stories, email nikki@propertyguru.com.sg
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