Property lures institutional investors

THE property boom on the east coast of Australia has highlighted some attractive investment opportunities in the residential market.

And it’s not just private investors who are analyzing the market; superannuation funds will be in the hunt if the deals stack up.

Massive increases in house prices in Sydney and Melbourne over the past two years have prompted some smart investors to look to the other States for investment opportunities.

Adelaide, Perth and Hobart have all received attention from investors interested in buying ahead of the market peak.

The superannuation funds have traditionally focused on commercial and industrial property, however market analysts suggest that if residential deals can deliver sufficient yields, the super funds might get on board.

Local agency Blackburn Real Estate has recently undergone a restructure to capitalise on the changing demands of the market.

The new business, Blackburn & Joyce Property Group, includes three new divisions.

Real Estate Institute of Western Australia president, and Blackburn and Joyce director, Graham Joyce, heads up the investment division.

Joyce Investment is focused on marketing investments in the local sector to local, national and international buyers.

Mr Joyce believes there are many exciting opportunities for investors interested in the Perth market.

“Within Australia the residential property market is very strong,” Mr Joyce said.

“Probably what we’ve seen is that the Perth market has been under-performing, particularly against NSW and Victoria.

“I think what we’ll see happen is the Perth market will go through a catch-up phase.”

This catch-up phase will allow investors to achieve greater returns on investments in Perth than in Sydney or Melbourne, where the market has probably already peaked, he said.

“The Australian economy is still strong and interest rates are still at record low levels, and will remain so,” Mr Joyce said.

“Home affordability is still strong in Perth, and it will remain so.”

The bulk of investors Mr Joyce works with are middle income earners looking to invest in property as a form of wealth creation for their retirement.

The market is predominantly targeting properties priced between $180,000 and $260,000.

“Once you get over $300,000 the use of depreciation and the tax benefits become less attractive,” Mr Joyce said.

“There is still a market for property over that level but you find they tend to be people who are buying with their heart, not their head. Investment property needs to be done more clinically.”

One of the major opportunities in this market is superannuation funds, according to Mr Joyce.

A shortage of strong commercial property in Australia will drive the superannuation funds to look at residential developments in the future, he said.

“One of the interesting areas will be in relation to super funds, which have large sums of money they are looking to invest in Australia,” Mr Joyce said.

“At some stage it will become difficult to place funds in Australia [in property].

“At some stage they will start to look at residential developments – I’d say they will be looking at brand new developments.

“It could be anything from in-vesting in retirement villages to blocks of apartments.”

He said there were indications

the local market was currently oversupplied in terms of apartment developments in the premium price range.

Nevertheless, Australia’s profile in terms of foreign investment was a bonus in terms of marketing residential developments to overseas investors. To attract international investors, Blackburn & Joyce Property Group will develop strategic alliances with other property professionals around the globe.

“I believe the Australian property market, in world terms, is very strong and globally I believe Australia is seen as a safe haven, Mr Joyce said.

“It’s seen as a good place to park money and there’s no better vehicle than the property market to put money into.

“I think Australian property will be sought after.

“The Perth market will remain strong this year and into 2003 and then will level off in the market.

“Then 18 months after that the market will start to move again, subject to Federal government intervention.”

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