GLOBAL – Australian pension funds are expected to invest around €5.6bn in the European and US property markets over the next five years, as they are forced to move outside the saturated domestic real estate market, a study shows.
Some AUD80bn (€55.8bn) of capital in Australia's fast-growing superannuation system is likely to be available for overall offshore investment by 2020, and 10% of this will be allocated to real estate, according to the new report by Jones Lang LaSalle's International Capital Group.
Richard Bloxam, head of European capital markets at Jones Lang LaSalle, said: "With the Australian domestic market unable to offer sufficient opportunities to provide the real estate exposure sought by funds, European real estate markets are set to benefit with increased investment flows."
Overall, the Australian funds' assets under management are set to grow to $2.8trn (€2.1trn) by 2020 from $1.4trn today, it said.
Australia's superannuation system is the fourth-largest asset pool in the world, under some measures.
The system is maintained by compulsory pension contributions, which have gradually grown to 9% of an individual's salary from 3% when the system began in 1992, and are set to reach 12% of wages by 2020.
Around 10% of Australian superannuation assets under management are invested in real estate right now.
As in the past, Europe and the US are likely to be the preferred destinations for Australian pension fund offshore property investment, Jones Lang LaSalle said in its report.
But it noted that emerging markets were likely to show the strongest growth in real estate assets over the next decade and predicted that a growing proportion of Australian capital would target emerging markets in the Asia Pacific region.
Most 'super' funds were cautious at the moment regarding offshore markets in the wake of the global financial crisis, said Matt Richards, head of the International Capital Group in Europe at Jones Lang LaSalle.
"This has resulted in a strong domestic bias and increased appetite for direct ownership," he said.
"We expect the next wave of offshore Australian capital to emerge in the form of joint ventures and dedicated investment mandates with specialist European fund managers."