Asian insurance funds are set to become more active in the Australian commercial property market in coming months, Australian Unity has predicted.
The fund manager’s head of property funds, retail, Mark Lumby predicted insurers from China, Japan and Korea would soon begin investing in the Australian office and retail sectors in growing numbers.
“They will have an insatiable appetite to come in and acquire investment properties here in Australia that are yield-focused,” he said.
“As a result, whilst there has been investment demand for metropolitan properties here in Australia, that is likely to continue given this new style of investor who is coming looking for yield-based investments.”
While these insurers were currently focused on other ‘gateway’ markets like London and New York, he said, they would turn to Australia when these opportunities started “drying up” due to Australia’s low dollar and comparatively high yields.
In particular, he suggested China was loosening regulations around insurers owning direct property, allowing them to buy into overseas markets.
AUI senior investment specialist Guy Sainsbury indicated Japanese insurers were also likely to be a significant presence in the Australian retail and office sectors.
“You are seeing some Japanese insurers who are starting to consider offshore because yield is just so low in their home market,” he said.
“From what I'm hearing, they are looking at some of the other cities in Asia and the yields are not much higher. That accentuates the attractiveness of somewhere like Australia.”
He predicted these insurers would arrive in Australia by the second half of 2015.
However, he encouraged investors to remember the impact of previous foreign investment in the office and retail markets.
“It's interesting, because you consider the Japanese participation in the real estate market in the '80s and that ended rather badly. You could start to see a return of significant money from Japan,” he said.
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