A new report indicates that foreign purchases of Australian hotels have hit an unprecedented high on the back of an investment drive hailing from Asia.
The report, by Jones Lang LaSalle (JLL), forecasts that the total value of transactions in 2013 is set to hit a record breaking $1.9 billion, for a gain of approximately 32 per cent compared to the robust results logged just last year.
At it stands, 2012 was one of the best years on record for the hotel property market, with 25 major transactions bringing the total value to $1.44 billion.
Investors from Southeast Asia are the key drivers of the unprecedented heights scaled by foreign purchases of Australian hotels, accounting for 72 per cent of the transaction volume last year.
Asian investors began to display renewed interest in the Australian hotel investment market after the Global Financial Crisis of 2008. The ensuing decline in hotel transactions as well as scarcity of debt financing provided ripe opportunities for cash rich players in Southeast Asia.
Investors from Hong Kong and Malaysia have now stepped to the fore as the most prominent investors, taking over from Singaporeans, who served as the chief source of investment during the 2009 to 2011 period.
Hotel buyers from Hong Kong accounted for 30 per cent of total transaction volume, while Malaysian investors were just a hair’s breadth behind at 29 per cent.
Chinese buyers, who have become a high profile presence in the residential property markets of Australia’s leading cities, began to make forays into hotel investment in 2012, with the acquisition of the Lindeman Island Resort and the Palazzo Versace Resort.
JLL also identifies another group of buyers who have risen to prominence in 2013 – major investment funds, usually with stakes in the hotel investment sectors of their home markets, who are currently seeking to diversify the geographic spread of their property assets.
Their interest in the Australian hotel market has been prompted by a loosening of regulations in their home countries concerning overseas investment, as well as the desire for low-risk diversification abroad.
This group accounted for two of the biggest hotel investments in 2013 – the purchase of the Four Seasons Hotel Sydney by Korea’s Mirae Asset Global Investments, and the acquisition of the Tourism Asset Holdings Limited portfolio – comprised of 31 assets, by the Abu Dhabi Investment Authorities.