The property market in Australia has become less compelling for funds seeking high returns due to the rapid asset price recovery and high taxes. According to a leading executive at LaSalle Investment Management, there are more attractive options in Singapore and Japan.
Ian Mackie, Chief Investment Officer of LaSalle Investment Management (Asia-Pacific), said in an interview that the plan of the Australian government to reduce withholding taxes for foreign investors is a necessary step to bring it in line with other regional countries.
“The tax situation puts, in my opinion, Australia at somewhat disadvantage when comparing with other countries in the region, because the after-tax result of the investment is penalized harder in Australia than it is in Japan, Korea, Hong Kong or Singapore,” said Mr. Mackie.
The Australian government plans to lessen the tax next July from 30 percent to 7.5 percent. The tax rates elsewhere in Asia vary from 5 to 10 percent.
According to Mr. Mackie, comparing the speed of the Australian property price recovery to those in other countries signified limited opportunities for high-return investors. The strength of the Australian dollar is also seen as a barrier as it boosts the hedging costs.
“We still see opportunities here but the pricings recovered so much faster. They didn’t go down as much as other countries did and recovered much faster,” said Mr. Mackie. “Maybe for us in Australia, the window is closing faster.”
Prices for office buildings in Australia were 20 percent lower than in the second quarter of 2008, while those in Tokyo and Singapore were still down by over 30 percent. Office vacancies in Australia are also showing signs of stability.
The real estate services firm Jones Lang LaSalle’s investment arm, LaSalle Investment Management, has an available US$3 billion to invest in Asia, after it raised an opportunity fund the previous year. Most of the funds have not been released yet, said Mr. Mackie.
Lauralee Martin, Chief Financial Officer of Jones Lang, said that as the region powers a global economy recovery, it will drive growth in its Asian business by 2010.
He sees some opportunities in Singapore’s suburban retail assets and in Japan’s logistic sector. He also claimed that Hong Kong, Thailand and Singapore have seen a sharper slide in property values, which can provide greater chances to outshine properties in Australia.