Tuesday, 25 July 2017 Sydney
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The Australian property market::

The Australian property market has, for many years, been a world leader. It was the first to establish a successful model for unlisted and listed property trusts.

This provided many smaller individual investors with an opportunity to participate in the ownership of major commercial property investments. The liquidity of the listed market provided the flexibility to hold or sell all, or a portion of their investment. Indian investors, in the main, prefer to invest in gold and property. They have been disinclined to participate in syndicates or trusts, as they like to be in control of their investment portfolio."

Sustainability agenda
"Australia has driven and embraced the sustainability agenda. The substantial global benefits of environmentally sustainable residential and commercial buildings, has become a preferred option for investors. Tenants’ occupancy costs and building outgoings are reduced, the health and wellbeing of employees enhanced, building property values can improve by up to 1% in the yield and tenants will stay longer in occupation. As for residential property, there is growing demand from purchasers for sustainable living accommodation. Consultants and developers in India have also embraced the sustainability program and established the Green Building Council of Australia."

Stable construction
"The construction industry in Australia is very stable. Our technology and disciplines are regularly exported to Asia, India and the Middle East. Due to the huge population in India, many cost and time saving measures are not used. This is mainly due to the need to create jobs and reduce the otherwise substantial costs of funding a huge social program. Developers have demonstrated their ability to make significant cost savings through the skilled management of projects. We offer the opportunity to add value to the Indian development market, through either joint ventures or engaging development managers from Australia."

Safe market
"In the current market, bank funding of projects is far more constrained than in previous downturns. Opportunities exist for sovereign funds, high net worth investors and private investment groups. They can engage with the major developers and construction companies joint venture debt & equity providers. Over the past 6 months, there has been a discernable increase in investment from Asia, India and the Middle East. Australia is seen as a safe market with secure capital and income growth."

Secure returns
"Unlike many Australian investors and institutions, investors from India and Asia have a longer investment horizon. This approach has been the catalyst for secure returns and long term capital growth, as the market moves through cycles of 5-7 years. It is important for any investors seeking to have a long term investment in the Australian market, to engage with a credible partner with a solid track record and visionary market knowledge. In our view, significant profits can be attained from joint venture development opportunities."

Successful ventures
"Provided the local partner has the financial capacity, and the skills to identify the best sites and understands the market supply and demand elements, such a venture will be very successful. Many offshore investors supply the debt funding, while the local partner is responsible for the development, construction and leasing risks. On completion, the offshore investors can acquire the project, at a pre-agreed capitalization rate, as well as sharing in the development profit. These opportunities are available in both commercial, residential and infrastructure projects. At International Property Group (IPG), we provide a highly skilled advisory team that is able to structure joint ventures, funding and assist with government liaison at the highest levels in the executive staff and Ministers."

Opportunities for offshore investment
"At IPG we also facilitate such opportunities for offshore investment groups and high net worth individuals. There is a significant NRI market in Australia. We believe an NRI Syndicate or unlisted Property Fund can be established especially for these and other offshore Indian investors. Such a pool of money from these sources would create a very significant funding vehicle. New South Wales is undersupplied in housing and commercial property, providing excellent opportunities for such an investment group to participate in development profits and build a quality investment portfolio."

"India and Australia have developed a bond. The skill base of both countries can provide an unchallengeable global team. Now is the time to open serious dialogue to facilitate this great opportunity."

John Elvy, Director - International Property Group

Property investment highlights

  • Companies such as Leighton have built two new Nokia factories in Chennai and about to start a third. There is no doubt, the cross border investment relationship between Australia and India is strong and will grow further.
  • Leighton is Australia’s largest contractor for infrastructure, mining and commercial building. A partnership with them would create a major development group, capable of capturing a substantial slice of the Australian development market.
  • Although rentals have reduced and values reduced in many sectors of the market, the underlying growth bodes well for the medium to long term. Undersupply in both residential & commercial sectors will not be satisfied for 3-5 years. Australia, particularly NSW, is the prime target market.
  • As confidence improves and the economy stabilizes, demand will strengthen. Those investors/developers with sites in growth sectors, prepared to spend the "extra upfront" costs to build five and six star sustainable buildings will be the winners over the next 10 years.

 

John Elvy profile

  • John Elvy has retired as the Executive General Manager, Development for Leighton Holdings Limited. He has been a property professional for 40 years.
  • Former Chairman and current Director, Leighton Properties Pty Ltd
  • Chairman of a Richmond Property Group in Abu Dhabi
  • Former Chairman of LJ Hooker Commercial Group
  • Chairman REIT Capital – Property development fund
  • Vice President NSW - Property Council of Australia

Company profiles

Based in Adelaide, South Australia, Finlaysons is the oldest firm in the State and has been practising commercial law for over 150 years. Our depth of experience affords...