Australia's direct property investment fell 20 per cent in the first half of 2007.

Jones Lang LaSalle Global Capital Flows report showed that Australian investors placed $US4.1 billion in direct cross-border property investment in the first half of 2007.

This compared to $US5.1 billion in the previous corresponding period.

"With yields at very low levels and competition for individual assets intense, Australian Listed Property Trusts have found it easier to increase their funds under management via corporate acquisition, particularly in Europe," Jones Lang LaSalle's Australia head of research and consulting Kathryn Matthews said.

According to Matthews, global real estate investment for 2007 was still likely to surpass 2006 levels.

"However, the current debt market turbulence will result in volumes in the second half being below those achieved in recent years," Matthews said.

Australian investors focus has also moved, with Asia replacing the United States as the region of choice.

The research found that the largest share of capital flows from Australia was placed in Japan, at 23 per cent.

Singapore claimed nine per cent, compared to less than four per cent placed in US assets.

"This is in stark contrast to first half of 2006, when the US accounted for over 26 per cent of direct investment and Japan and Singapore accounted for insignificant proportions of Australian investment," Matthews said.

According to Matthews, attractive yield spreads over financing costs have made investors bullish about potential future returns for Japan.