Australia – an Attractive Market for Swiss Real Estate Investors
Prime office space in the heart of Melbourne and Sydney, Australia’s principal cities, is in high demand, offering Swiss institutional investors interesting opportunities.
Over the past few years, increased demand for real estate investments has led to rising real estate prices in virtually all relevant real estate markets worldwide, and hence to lower return expectations for new investors. This is a trend that investors in Switzerland have long been familiar with.
By contrast, international real estate markets still offer attractive opportunities with a range of risk-return profiles to fit every investor. Moreover, international real estate investments make a significant contribution to the diversification of Swiss investors’ overall real estate portfolios.
Recession-free for twenty-five years
Offering Swiss investors an opportunity to participate in one of the longest economic upturns ever, the Australian real estate market is among the more attractive property markets. The country has not seen a recession in over twenty-five years. Although the long-term impact of the Covid-19 pandemic is currently not clear, Australia has proved to be relatively resilient in past crises.
The sustained positive economic trend also benefits real estate investors. Thanks to continuous employment growth, especially in the service sector, demand for prime office space in city centre locations is on the rise, leading to growth in rents and rising returns for investors.
Favourable entry opportunities and framework conditions
On top of this, Australia offers real estate investors relatively cheap entry opportunities. While acquisition yields for core office properties in Switzerland range between 2.0% and 3.0%, they are as high as 4.5% to 5.0% in the top markets of Sydney and Melbourne, delivering an attractive yield spread compared to local investment opportunities.
Aside from the cheaper entry level, real estate investors also benefit from the long-term tenancy structures that are typical for the country, as well as from contractually stipulated annual rent rises which ensure reliable long-term planning conditions and provide protection against inflation.
