Australian private equity property deals worth US$8 billion were completed in the first six months of this year, or 80% of the level in all of 2018, as tax incentives and a weaker local dollar boost foreign demand, according to data provider Preqin and Australia’s Perpetual Corporate Trust.
Although that’s down from a peak of $15 billion in 2017, the amount of capital flowing into Australia’s real estate sector has been rising, and deal activity has been “healthy”, they say in a report on November 4, citing “favourable regulatory and monetary circumstances”.
Charts in the report show that around 70-75 deals were completed between January and June versus 155-165 all last year.
The Australian government provides tax incentives for foreign property investments that are structured as managed investment trusts, which allows passive investments. And the Australian dollar has lost about 15% of its value against the US dollar since 2015, making it cheaper for foreign investors.
“The Australian real assets industry is growing, and investors overseas are turning towards the region. The tax incentives for foreign investors, the depreciating Australian dollar and the privatisation wave in the infrastructure industry have awakened investors’ appetite, and this can be seen in the increased fundraising for the region,” Patrick Adefuye, head of real assets at Preqin, says in the report.
There were 234 deals completed in the 12 months to June 2019, with investors from Asia accounting for the largest share at 38%, followed by Australian institutional investors with 33%, and investors based in Europe and North America with 29%.
“As the hunt for yield continues and investors search for reliable returns, we believe Australian real assets present long-term, innovative and exciting opportunities for global investors,” Glen Dogan, general manager of Perpetual Corporate Trust, says in the report.