Cash flows into global property market - Sydney Morning Herald

The amount of money moving into the higher-yielding global property market could reach $1 trillion for the first time since early 2007, before the financial crisis engulfed the world.

The global property investment market experienced a modest 6 per cent rise in activity during 2012 with volumes reaching $US929 billion, according to global agency Cushman & Wakefield.

Its president and chief executive Glenn Rufrano told a conference on Tuesday that in the wake of this result, the firm predicted global investment volumes would rise 14 per cent in 2013.

This would be the highest level since the year before the 2008 financial crisis when investors ploughed $1.25 trillion into property deals. At least 10 per cent to 12 per cent of the money is making its way to Australia through direct property ownership or via sharemarket-listed real estate investment trusts (REITs).

The latest global Wealth Report from Knight Frank indicated that private investors would turn away from the low returns offered on triple-A government bonds and low-interest-bearing cash in the bank.

The managing director, capital transactions Australia for Knight Frank, James Parry, said money coming out of the cash accounts was going to core assets such as fully let offices on long leases to blue-chip or government tenants, and retail space in the world's premier shopping precincts.

Mr Parry, who recently met 27 clients in Singapore and Korea, said direct commercial property investment was an increasingly important element for Asian-based high net worth individuals, and offshore and institutional investors.

''Demand for commercial real estate has been generally robust in Asia, where markets have been driven by the wealthy getting wealthier and a desire to find safe havens due to volatility in the equity and residential markets,'' Mr Parry said.

''This is coupled with a number of countries with elections taking place this year.

''Australia is proving to be a popular location with investors from Asia-Pacific, Europe and North America who are looking to invest more than $200 million - mainly in the Sydney and Melbourne commercial markets.''

Mr Parry said Sydney was probably the strongest local market in demand, thanks to its international appeal as the ''gateway to Australia''.

''This together with the transparency, yield and relative geopolitical stability that Australia offers is a clear drawcard,'' he said. With regard to local investors the weight of money had led superannuation funds to increase their exposure, with CorVal buying 9 Hunter Street, Sydney.

''The other factor influencing downward pressure on yields is the increase in the availability and cost of debt,'' Mr Parry said.

The managing director of Cushman & Wakefield Australia, David Woolford, said the strength of the Australian real estate market continued to resonate with domestic and international investors.

''Despite the uncertainty that characterised the international investment market in 2012, Australia maintained its top-10 status as a global investment target and recorded one of the strongest growth rates for investment in the Asia-Pacific region,'' he said.