Japan investment into Australia
Japan invests in Australia. IMAGE: Canva
  • Japanese investment surged to over $2 billion as top Australia offshore buyers in 2023
  • Total deal volumes fell but living and hotels saw gains from strong demand
  • Cooling inflation and expected rate cuts to spur more deals in 2024

Japanese buyers have taken pole position as the leading source of offshore investment into Australia’s real estate markets during 2023, reveals new CBRE research.

Total Japanese property investment in Australia surged to just over $2 billion last year, well above the $140 million deployed in 2022.

This helped Japan eclipse other major sources like North America ($1.6 billion, down 17% year-on-year), Hong Kong ($1 billion) and Singapore ($1 billion, down 65%).

Capital Flows Into Australia 2023

Inbound capital sources into Australia for 2023
Inbound capital sources into Australia 2023. Source: CBRE Research

Low rates provide a competitive edge

CBRE’s Australian Head of Capital Markets Research Tom Broderick said ultra-low interest rates in Japan have enabled investors from there to enjoy a distinct competitive advantage over other countries and even domestic Australian groups.

Japanese players were highly active in both the expanding build-to-rent sector and commercial office assets, participating in major deals like Mitsubishi Estate’s co-investment alongside Mirvac, and Daiwa House’s strategic alliance on an apartment project with Lendlease.

Total investment volumes decline

Meanwhile, total national investment volumes across both domestic and foreign capital eased 31% over 2022 levels to finish at $24.1 billion last year, CBRE’s wide-ranging Capital Flows report shows.

Ongoing repricing in some sectors has continued crimping turnover. Industrial, office and retail assets saw double-digit percentage declines in deal flow over the year.

But living and hospitality property bucked the trend, enjoying upticks of 39% and 11% respectively on the back of robust underlying consumer demand.

Brighter outlook emerging

Nonetheless, CBRE anticipates transaction activity gradually improving over 2024 before strongly rebounding in 2025.

“The outlook for interest rates in Australia has improved significantly in recent months, with the potential for multiple cuts in 2024,” said Flint Davidson, Capital Markets Head for CBRE Pacific.

“As such, we anticipate an acceleration of investment activity in the second half of this year.”

The report also highlighted that builders need to bring more stock to market to satisfy unrelenting investor hunger for property assets exposed to secular tailwinds.

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