Sydney has made the top 10 list of major global super cities for total volume of overseas investment in 2016, with $5.7 billion of offshore funds acquiring property in the city last year.
According to Knight Frank’s global research report Active Capital – The Report 2017, which examined domestic and overseas capital flows, Sydney placed seventh behind New York, Central London, Paris, Berlin, Shanghai and Dublin.
The report said the volume of international capital reaching Sydney has increased, hitting 55% of total investment.
Knight Frank Senior Research Director Jennelle Wilson said investors are increasingly searching the globe for yield in this low-return environment, and Sydney is expected to continue to attract offshore funds.
“Investors are looking for security of income, liquidity and diversification – all equally important – as are the ambitious corporate business plans of those looking to build global platforms,” she said.
“Underpinning this, and a key part of the recent wave of global capital activity, is an increasingly open outlook from a number of governments, such as China and Taiwan, who have loosened restrictions on overseas investment at the same time as many investors have increased target real estate allocations.
“Sydney has definitely been the focus of offshore investment, accounting for 45% of inflows for 2016 and 2017 to date followed by Melbourne (32%) and Brisbane (10%).”
Globally, New York attracted the most overseas capital in 2016, $16.3 billion, but remained largely driven by domestic buyers, who accounted for 60 per cent of total investment.
London was ranked second in terms of overseas in investment, but the $15.9 billion of foreign capital represented 80% of total volumes, making it the super city most driven by overseas capital.
Knight Frank Joint Head of Institutional Sales Paul Roberts said the investment case for Sydney CBD Prime assets has never been stronger.
“Record levels of rental growth, significant public infrastructure improvements and low levels of net supply over the next three years will see continued demand from offshore investors seeking to place capital in assets deriving a solid income profile, with genuine prospects for significant capital growth,” he said.
Elsewhere in Europe, Paris and Berlin attracted overseas capital totalling $9.7 billion and $6.8 billion respectively.
In Berlin, this constituted 69% of total investment activity, whereas in Paris domestic buyers are more active, accounting for 61% of total transactions.
“In this low yield environment we see the sheer weight of global real estate capital, and the diversity of buyer types as deeper than ever before,” Knight Frank Global Head of Capital Markets Andrew Sim said.
“However, as we enter what we see as a new phase of the economic cycle, active capital flows are likely to change direction and emphasis, with investors from emerging markets – which have been a major engine of global activity – expected to focus attention on domestic markets as foreign exchange movements shift out of their favour.
“This in turn, means greater opportunity for domestic buyers in developed markets.”
Knight Frank predicted more than 30% of total global transactions will be cross-border as the globalisation of real estate continues in 2018.