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Wholesale property risk appetite and offshoring up
2011 will bring an increase in the risk appetite and overseas investment allocations of wholesale property investors, according to AMP Capital Investors.
There will be further investment in core real estate while an overall increase in wholesale property risk appetite will be manifested through investments in opportunistic funds, core plus funds and offshore investment, according to AMP Capital head of property funds management Chris Judd.
Judd predicted a "moderate but solid" outlook for 2011 of around 8-10 per cent core returns.
While some funds were now investing overseas directly, Judd expected that some larger funds would also consider investing in offshore markets and in offshore funds.
Andrew Bird, AMP Capital chief investment officer for property, said investors who hadn't been burned during the global financial crisis (in the way that real estate investment trust investors had) could see this as a good time to go offshore. "[Wholesale property] investment has to go offshore. With super going from 9 to 12 per cent there's still not enough opportunity to invest in Australia," he said.
"[Real estate investment trust] investors have been scarred, but the offshore allocation of Australian wholesale fund investors in the past five years has been negligible, so not a lot of our clients, unlisted wholesale super funds, have had exposure or been burned in recent years."
Overall Bird said that wholesale property investors could go into 2011 feeling optimistic.
There has been growing interest from international investors this year in property without a lot of follow through in terms of actual investment yet, but a lot more investors actually understood the Australian property story, he said. Pre-GFC they didn't want to listen because they were making lots of money from other geographies such as the Middle East and Asia.
He described Australia as virtually a proxy for Asia, with its highly transparent property investment market that is leveraged to the growth that's coming out of Asia, notwithstanding the strength of the Aussie dollar.
"Now [international investors] are looking for much lower risk and they see Australia as being lower risk but with a growth play attached to it," he said.
"We'll see more international money coming into the Australian property market and we'll continue to see good demand from Australian pension funds that have been coming back into the market quite strongly this year."
AUTHOR
Mike Taylor
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