Shifting capital flows away from US assets, Australians are focusing more on direct investment in Japan and Singapore, according to new research.
The research, which was conducted by Jones Lang LaSalle into the latest global capital flows, highlighted the growing importance of Japanese assets to Australian investors, accounting for 23 per cent of capital flows from Australia.
Findings also indicated that, since early last year, a significant shift away from US assets suggests Australians are looking closer to home for direct investments, with a further 9 per cent of capital flows placed in assets in Singapore.
This is in stark contrast with figures from early 2006, which showed US assets accounted for over 26 per cent of direct investment, with relatively insignificant proportions of Australian investment placed in Japan and Singapore. Today, US assets account for less than 4 per cent of Australian capital flows.
Australian investors continue to be particularly active on the global property investment stage during the first half of this year, placing $US4.1 billion in direct cross-border property investment. And global real estate investment for 2007 is likely to surpass 2006 levels. However, current debt market turbulence will result in volumes in the second half being close to those achieved in recent years, according to the research.
Jones Lang LaSalle Australia head of research and consulting Kathryn Matthews said pricing for risk is clearly increasingly returning to investors’ and financiers’ agendas, considering that the credit crunch is still working its way through the system.
“Certainly the Fed’s decision to cut rates last week has helped restore confidence, but was for the most part already factored into the markets and will take time to have any substantial impact on the economy,” she said.
Matthews also pointed out that inflation is still a concern suggesting that what is gained in GDP and market stability today may be offset by higher inflation and a rise in interest rates down the road.
“Over the next several months we expect a return to healthier liquidity levels once the current paper pipeline is further digested as the fundamentals in real estate remain strong. There is liquidity out there and there are plenty of active investors in the market. At this stage, we’re seeing more of an over-reaction, than an over-correction,” she said.
