The Dubai Effect: why Australian property is an Asia Pacific safe haven

In recent years, Australia has emerged as a preferred destination for investors from the Asia Pacific region, particularly from Singapore, Hong Kong, and mainland China.

This trend, dubbed The Dubai Effect, reflects a growing perception of Australia as a stable and lucrative investment environment.

An influx of investors from these regions, particularly in the commercial sphere, is driven by the relatively easier approval process from the Foreign Investment Review Board (FIRB), making Australia an attractive destination for foreign capital.

The concept of The Dubai Effect, popularised by KPMG’s Bernard Salt, highlights how cities like Dubai have become hubs for global wealth, attracting investment through favourable regulatory environments, strategic locations and robust infrastructure.

Australia, with its strong rule of law, transparent regulatory framework, and high quality of life, mirrors these characteristics, positioning itself as a safe haven for the wealth of the Asia Pacific.

I foresee a future where Australia’s property market, particularly the commercial sector, becomes increasingly dominated by overseas investors.

As Australia recovers from economic downturns, immigration will play a crucial role in driving growth.

This increase of foreign capital is expected to reduce yields in the commercial property market, making it an attractive proposition for investors seeking stable returns. In commercial real estate, yield refers to the annual income generated by a property as a percentage of its market value. It’s usually calculated as the ratio of the net operating income (NOI) to the property’s purchase price or market value.

The commercial property sector is particularly appealing due to its perceived stability and the streamlined approval processes compared to residential investments.

Safe haven for global capital

This shift towards commercial properties reflects a broader trend in global investment patterns.

As residential property markets become saturated and subject to stricter regulations, investors are turning to commercial properties as a safer and potentially more profitable alternative.

The influx of foreign money into Australia’s commercial property market is expected to drive yields and offer attractive return on investment prospects, further cementing Australia’s status as a safe haven for global capital.

This trend, however, also raises important questions about the future of Australia’s economy and society.

The increasing presence of wealthy foreign investors in the property market may exacerbate issues of affordability and access for local residents.

While acknowledging this reality, I emphasise that opportunities still exist within the market.

The evolving economic landscape will undoubtedly benefit those with the means to invest, but it also challenges policymakers to ensure that the benefits of this growth are distributed more equitably.

The Dubai Effect on Australia’s property market is a testament to the country’s appeal as a destination for global investment.

As Australia continues to attract capital from the Asia Pacific region, it must navigate the challenges and opportunities that come with this trend.

The future of Australia’s property market, particularly in the commercial sector, looks promising, but it also requires careful management to ensure the prosperity it brings is shared by all.