Australian real estate sector recognised as a top investment destination for 2016

Tuesday 15 December 2015

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Acclimatising to a low growth global economic environment is paying dividends for the Australian real estate sector after it was recognised as a top investment destination in EY’s Capital Confidence Barometer.

The report is based on a global survey of more than 1,600 executives in 53 countries, including 124 in Australia.

EY Oceania Real Estate Partner Richard Bowman said conditions were improving locally as globally Australia was considered a top investment destination along with the United States, China, Canada and the United Kingdom.

“Australia’s stability as an investment destination is seeing confidence rise in the Sydney and Melbourne markets, particularly when it comes to core commercial, retail and industrial assets.

“This contrasts with the resource states of Perth and Brisbane where next year all eyes will be on whether there will be enough growth in resource prices to support expansion projects,” Mr Bowman said.

Globally, 60% of survey respondents said they would be focused on cost reduction and operational efficiency over the next 12 months but Mr Bowman said growth would be a key focus locally in 2016.

“This year we have seen a move away from the cost reduction phase, with the Australian market moving ahead and trying to grow the top line,” Mr Bowman said.

Mr Bowman said more than ever, digital technology influences what companies acquire, how they integrate, and how they monitor and measure success.

“Australian respondents said digital was increasingly impacting on their M&A strategy with 55% saying deal due diligence was the main focus.

“Digital technology accelerates the integration timeline and therefore the return on investment of the acquired business, while newer technologies such as cloud computing significantly reduce integration timelines. We expect that its impact will continue to grow in importance in 2016,” Mr Bowman said.

The report identifies the following key trends globally:

  • Forty per cent of respondents believe the prices of assets will increase over the next 12 months.
  • Fifty seven per cent of companies have three or more deals in the pipeline.
  • Seventy seven per cent of dealmakers expect the M&A market to improve in the next 12 months.
  • Eighty seven per cent of executives view cybersecurity as a measurable risk to their deal process.

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