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SG UK trumps Australia for cross-border investments

Property Here - Tuesday, May 14, 2013

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By Shabnam Muzammil:

The UK is still the most popular destination for cross-border investments despite having a less favourable economy than Australia, according to Savills.

The latter has a forecasted GDP of three percent this year compared to the UK’s 0.6 percent. But London’s cross-border investments hit £14 billion (S$26.64 billion) compared to Australia’s £2 billion (S$3.81 billion).

This is due to heftier taxes down under which heavily affect investors’ returns, the cost of borrowing driven by the Australian base rate of interest and continued strengthening of the Aussie dollar and its impact on hedging costs.

Despite negative factors in the UK such as higher taxes, further spending cuts and continued economic uncertainty, London remains the top locale among global investors due to its weak currency which keeps investment costs down, as well as its role as a global financial hub.

The city’s property market is also transparent and overseas-friendly. In particular, its commercial real estate segment offers stable long-term income and landlord-friendly lease provisions.

“Looking forward, we anticipate further investment demand from key Asian organisations. This includes the recent announcement of the purchase of 30 Crown Place, London for a reported £142 million (S$270.2 million) by the Malaysian, Japanese and Korean pension funds and conglomerates with Samsung SRA, as well as Chinese and Hong Kong investment groups and family offices continuing their focus on London,” Savills noted.

“However, many of these groups’ global weightings are heavily London-centric and while their appetite for the city remains robust, we expect to see further demand for Australia, which for the reasons outlined above provides the investment criteria required by these groups. This is likely to be further fuelled, as recent reductions in the cost of borrowing are compensating for the cost of hedging.” 




Shabnam Muzammil, Senior Journalist at PropertyGuru, wrote this story. To contact her about this or other stories email shabnam@allproperty.com.sg