Real estate hits and misses in Australia

By Sarah Cunningham-Scharf | May 31, 2016 | Last updated on May 31, 2016
2 min read

From an economic perspective, Canada and Australia share many similarities. For example, both are resource-rich countries with relatively small populations and large export markets.

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So says Chip McKinley, senior vice-president and portfolio manager with Cohen & Steers in New York. Among other real estate funds, he manages the Renaissance Global Real Estate Fund.

Currently, he’s underweight Australia because he finds it’s an unattractive region due to poor underlying operating fundamentals.

But there are bright spots in the economy. “Part of the advantage that Australia has had relative to Canada is a strong export market to China, which has been a major headwind for several years. With China stabilizing in recent months and exhibiting stronger growth, [there has been] a big pickup in export growth from Australia to China.”

Read: China is buying Canada: Inside the real estate frenzy

Australia’s consumer sector is also very healthy, says McKinley. Similar to the loonie, the Australian dollar has been undervalued for several years. As a result, “More Australians are spending their money at home instead of travelling or spending their money abroad.” The country’s job growth and real wages are also improving.

When it comes to real estate, this has created an opportunity to invest in shopping malls, says McKinley, particularly in those located near the metropolitan centers of Sydney and, to a lesser extent, Melbourne.

Read: Low loonie = opportunities for U.S. real estate

But Australia’s office market is a different story, he notes. While Canada’s office market is strong in cities such as Toronto and Vancouver, “Australia’s has been performing very poorly over the last few years. So we don’t see much opportunity to invest and don’t anticipate that [will] change, at least in the next year or so.”

Read: Housing too hot in Vancouver, Toronto

McKinley explains, “There are concerns around both demand and supply in Australia’s office market, which is a problem that Canada simply doesn’t have.”

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Sarah Cunningham-Scharf