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Aussies want more US property
Ted McDonnell

Australian investors are fast becoming major players in the US property scene, according to a seminar hosted by some of the world’s leading property experts in New York last week.

The 2003 Foreign Investment Survey carried out by Kingsley Associates, shows that almost $300 billion is invested globally in property with about half of that invested in the U.S.

In 2004, foreign investors are expected to earmark 56% of their cross-border allocations for US real estate and indeed the US was cited as the country providing the most stable and secure real estate investments by 60% of the survey’s respondents, with Canada and France tying for second place. Germany was viewed by over 80% of respondents as the country supplying the most active foreign buyers of US real estate followed by, for the first time, Australia, a new source with correspondingly significant growth potential.

Australian property trusts, led by the likes of Westfield and more recently Centro are now being recognised as significant players on the US property investment scene.

Although nearly half of the average foreign investor’s global real estate portfolio is allocated to office properties, its attractiveness for new investment as regards the USA has declined steadily since 2001 giving way to retail, multifamily and hotel/leisure properties as offering superior interest value to the US-inclined investor.

Respondents to the international survey expressed an overwhelming preference for equity ownership of properties at the expense of REITs, and the rate of return on REITs was expected to fall dramatically in 2004 from an average of 29% to just 8.5%.

According to investment specialist James A. Fetgatter as an asset class producing very respectable returns in an extremely volatile equities market, real estate has become a serious competitor for investors’ dollars.

For the second year running in the survey, Washington DC was considered the best global city for real estate investment, followed by London and Paris with NYC occupying fourth place.

Sydney still leads Australian cities as far as foreign investment is concerned.

Chief executive of Coldwell Banker Hunt Kennedy, David Michonski said he was convinced that the city of New York is superbly placed for an investment boom set to last the whole decade, barring unforeseen events such as another major terrorist attack or a global economic slump.

“The dollar has declined by about 40% in value against the world’s major currencies which means, in concrete terms, that New York real estate is on sale with a 40% discount.”

The NY housing market, under-built for the last 15 years, is already strong, and is set to improve, with several factors supporting this market buoyancy. Firstly, investors like locations with which they are familiar and New York often occupies a ‘top of mind’ position in this respect. Immigration is currently on the biggest scale in US history, with NY being a natural arrival point and, of this large and continuing flow of immigrants, as many as 20% will buy their first home in the US during the 12 months following their arrival. Also, Internet technology is improving market efficiency, which particularly benefits major centres like NY.

Current demographic trends towards increasing numbers of smaller households are also strengthening housing demand in the city, due in large part to the singles boom and the rise in non-nuclear families. Finally, the prestige, power, cultural and economic leadership of New York continues to grow, making the city even more attractive to purchasers. Although the main overseas investors in the NY residential market are traditionally from the UK, Germany and the Netherlands, growing interest is coming from Eastern Europe, Russia, Brazil, Israel and India.

The seminar forms part of a program of regular events organised by the Fiabci-USA New York Council in 2004.

The Fiabci seminar was chaired by Lisa James Otto, President of the Fiabci-USA NY Council and moderated by Cynthia Crowley, President of MANAR, the panel of speakers included David Michonski, CEO of Coldwell Banker Hunt Kennedy and 2004 NAR International Liaison Officer, Fiabci member Angela Eliopoulous, President of Global Owner Property Consultants, and James A. Fetgatter, CEO, Association of Foreign Investors in Real Estate (AFIRE), also a Fiabci member.