Industry super fund-owned property investor ISPT expects plenty of investment opportunities as investors reweight their portfolios and banks get tougher on their lenders, but inflows are still far off the peak levels of 2006 and 2007.
"Throughout 2008 and 2009, there were virtually no inflows into core property, mainly because the prospects of returns were poor; better prospects were coming from equities and other asset classes," ISPT chief executive Daryl Browning said.
"However, throughout 2010 and 2011 there has been an increase in appetite and our investors are making allocations to property, but it hasn't returned to the level of 2006 and 2007."
Browning said the outlook for property growth was still fairly gloomy and, therefore, strong inflows would not return in the near future.
"I think it will be fairly consistent. I don't think you will see massive amounts of money flow into the sector," he said.
"The outlook for commercial and retail, in particular, is for moderate growth, not high growth, and super funds will look where they can get the best risk-adjusted returns."
But there was no shortage of investment opportunities, as competitors had been reweighting their portfolios, causing some properties to come onto the market, he said.
In addition, banks are tightening the screws on lenders who are in breach of their loan covenants.
In contrast to previous market cycles, banks took a reasonably lenient approach to their lenders during the global financial crisis, which avoided the market being flooded with property assets and keeping prices and income generated from properties reasonably stable.
But there are now signs banks are losing patience.
"I think we are just starting to see the tip of it, but look it is mainly going to be the secondary stock. We tend to hear that property is now coming onto market, but there is certainly not a flood of it," Browning said.
"As in any market, there is a shortage of the best properties."
ISPT is planning to launch at least one more development fund this year, possibly around July.
"We are looking at at least one more development fund - possibly two. There is still some demand from investors for that, and that is certainly an area where the banks aren't as aggressive as they were two or three years ago," Browning said.
He said the fund would not be constrained by any particular sector focus.
"We tended to focus in the last years on residential, but certainly the fund is able to invest across all circuits," he said.
