PERTH’S property markets are proving attractive to overseas investors, with new research showing office, retail and industrial sectors in Western Australia are undervalued amid rising enquiry levels from offshore investors.
PERTH’S property markets are proving attractive to overseas investors, with new research showing office, retail and industrial sectors in Western Australia are undervalued amid rising enquiry levels from offshore investors.
International property analyst DTZ’s third quarter Fair Value index indicated Perth’s prime office, retail and industrial property sectors are all undervalued and offer attractive returns to investors.
The DTZ Fair Value index measures investor opportunity across 185 individual property markets globally, and classifies them as ‘hot’, ‘warm’, or ‘cold’, depending on the market’s attractiveness to investors.
According to DTZ head of Asia Pacific Research David Green-Morgan, Perth’s office sector has been classified as ‘hot’, with 2.71 per cent average annual rental growth predicted between 2010 and 2014.
“This reflects a current undervalue in Perth’s office sector of as much as 8 per cent and this is expected to continue for the next two to three quarters,” Mr Green-Morgan said.
“Similarly, the industrial sector in Perth is undervalued by 2.5 per cent and has been classified warm due to its role in the Asia Pacific manufacturing supply chain and commodities sector.
“Between 2010 and 2014 the report has forecast industrial rental growth in Perth of 3.26 per cent – the second highest in the country behind Melbourne – and retail rental growth of 1.30 per cent.”
DTZ Perth joint managing director Brad Carey said the commercial property sector in WA had received a significant increase in interest from investors who believed the market had bottomed-out.
High-value sales during the past six months include: the Swan Brewery site on Mounts Bay Road to Singaporean investors for around $50 million; SAS Global’s former OneSteel site in North Fremantle to a Chinese investor for $30 million; and the May Holman Centre on St Georges Terrace for $32 million to Mimi Wong’s Golden Group.
“With net effective rents coming back by as much as 25 per cent since the peak of the market in 2008, Perth investment property now represents outstanding buying,” Mr Carey said.
WA-based fund management group Otan’s Mark Butler said WA’s residential sector had also piqued interest with overseas investors.
Mr Butler said the weak US dollar and WA’s strong economic outlook had caused a spike in interest from Asia.
Otan focuses on residential developments and has launched offerings in Queens Park, South Beach and Subiaco.
Mr Butler said enquiry rates from investors out of Singapore, Malaysia, China and Hong Kong had been rising steadily.
“So far, 10 per cent of the capital we have raised in our first six months – more than $20 million – has come from Asia, and over the same time, there has been a marked increase in interest from other investors based in Asia who are looking at investment options in WA,” he said.
Mr Butler said the residential property sector in WA was becoming attractive to Asian investors because of its comparative affordability and proximity to overseas markets.
“With high-end apartments across Asia costing significantly more per square metre than here, getting into those property markets requires a significantly larger outlay of capital than investing in Australian managed property funds,” he said.
“Asia-based investors are able to borrow money locally where interest rates are very low, plough those funds into WA’s property sector and expect very good returns, much better than can be gained in many other countries.
“Being able to jump on a plane and very quickly be on the ground here in WA to assess the investment opportunity also clearly adds to the appeal.”
