Malaysian investors in Australia will most likely focus on commercial properties with the implementation of new tax rates targetting foreign buyers of residential real estate, according to Knight Frank Australia.
The property consultancy, which recently organised a roadshow to gauge investors’ sentiment, noted that the Australian property market remained a key attraction for Malaysian investors despite the recent changes to the country’s property tax law.
“Despite the recent stamp duty changes imposed on foreigners purchasing residential property, interest from Malaysian private and institutional investors is remarkably strong,” Knight Frank head of commercial sales Paul Henley said in a statement.
“We expect many commercial, hotel and retail assets transactions from Malaysian investors over the next year.
“These assets are not impacted by the tax changes, and some residential specialists will still show interest at the right pricing metrics to build scale,” he added, referring to SP Setia Bhd’s recent purchase of an office tower at 288 Exhibition Street, Melbourne, for A$101mil ( S$104.3mil) as an example of the growing interest of Malaysian investors in Australia’s commercial property sector.
In an effort to limit the amount of foreign money coming into its real-estate market to keep home prices from rising further, the Australian government had implemented new tax laws targetting foreign investors.
These changes included a stamp duty surcharge of up to 7 per cent of residential real estate, and an extra 10 per cent withholding tax for a property with a market value of more than A$2mil.
According to Henley, the Australian property market remained attractive to Malaysian investors due to its strong underlying economic fundamentals, including a record-low interest-rate environment.
Malaysian investments in Australian real estate had averaged at A$750mil over the past six years, although deal flow had not been as prevalent over the past year.
“With interest rates having dropped to their lowest ever, and a stable political scene with the Federal election result, combined with an ever-growing population, Australia is well-positioned for offshore investors,” he said.
Separately, Sarkunan Subramaniam, Knight Frank’s managing director for Malaysia, said there was a close connection between Malaysia and Australia because the latter is one of the preferred education and tourism destinations for many Malaysians.
“Many Malaysians travel there for education… 77 per cent of Malaysia’s ultra-high net worth individuals are expected to send their children abroad for university over the next year,” he said.
In addition, Sarkunan said there was a growing number of Malaysians visiting Australia, with the rate having risen by more than 40 per cent over the past three years.
Meanwhile, Knight Frank head of research and consulting Matt Whitby said UK’s referendum to leave the European Union, or Brexit, would likely accentuate global capital flows into Australia.
“I expect Australia to benefit from Brexit and other global uncertainty, as it remains a safe-haven for investors.
“With volumes slowing over the past quarter, mainly on the back of limited supply of assets, I expect Brexit will accentuate the capital flows into Australia and volumes will pick up in the second half of 2016,” Whitby said.
“Australia’s economy is the envy of the developed world, growing at 3.1 per cent as at the March 2016 quarter. Sydney and Melbourne are driving performance, while our population is strong, with a growth average of 1.5 per cent across the country,” he added.