Investing in real estate in Australia -October 15, 2012

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According to a CIA World Fact report:  “In recent decades Australia has transformed itself into an internationally competitive market economy. It boasted one of the OECD’s fastest growing economies during the 1990s, a performance due in large part to economic reforms adopted in the 1980s”.

Here are some more basic facts about Australia: with a land mass the size of the US contiguous 48 states but a population of only 22 million, a highly educated population becoming increasingly interlinked with nearby China, Japan, India and other Asian economies, Australia has propelled itself into the number two position in the latest United Nations Human Development Index, behind Norway. This is a big achievement. Australia’s abundant and diverse natural resources (coal, iron ore, copper, gold, uranium and renewable natural energy resources) make it a magnet for high levels of direct foreign investment estimated at $550 billion. It has a per capita income of $40,800. Another impressive statistic according to the CIA report is that no Australian is shown below the poverty line.

This report will focus on opportunities in Australia’s real estate sector – a leading sector catching the attention of foreign investors. According to an Australian source, “there are multiple unit development projects in the planning stages as well as single family homes, commercial opportunities or just rural/farm properties. All these present an investment opportunity unequal to anywhere else in the world.”

Interestingly according to a recent Washington Post article, “India’s wealthy, from old money to nouveaux riches and IT entrepreneurs are quietly snapping up hotels and mines Down Under just as Australia embarks on an immigration campaign to attract long term investment.” Some of the wealthiest Indians such as the Jindal group, Gautam Adani and Nadathur Raghavan of Infosys Technologies et al have all acquired sizable investments in Australia. According to Paul Dowling the principal analyst at the banking research firm East and Partners “in the last six to nine months there has been a lot of private investment into Australia because it is seen as a safe haven”. While Indian nationals have traditionally favored Britain and North America as off shore investment destinations, private wealth bankers have noticed a growing demand for Australian real estate particularly hotels ad service apartments. This is not too surprising because according to a forecast by an analyst in Singapore, Australian real estate will yield a 10% return topping the returns of Japan and South Korea.

The Washington Post article has also disclosed that Australia is now entering its 21st year of uninterrupted annual growth, having dodged a recession after the 2008 global financial crisis which had a huge negative impact in many countries. Capitalizing on its exceptional climate for foreign investment, the Australian government is about to launch a “significant investor” program aimed at competing with New Zealand, Canada and Singapore in attracting a growing number of Asia’s rich. India is reportedly home to 7000 millionaires whose fortunes amount to nearly $1 trillion. This data has been gleaned from the global wealth intelligence firm Wealth X.

Conclusion:

Ever so gradually, global growth and wealth is shifting from North America and Europe to the Asia-Pacific region, Brazil and Russia. In the Asia-Pacific region, Australia currently and likely and for the foreseeable future, offers the most solid and stable infrastructure for foreign money seeking lucrative new avenues. It would be prudent for investors specially those whose portfolios are more aligned with North America, Europe or the Middle East to diversify them to take advantage of the exciting opportunities available in Australia particularly in the real estate sector.

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