Superannuation fund appetite for real estate to wane in 2012

Superannuation funds that were active in the real estate sector last year are likely to slow the pace of their investment as they digest their acquisitions and watch growth expectations for 2012, according to Lasalle Investment Management associate director of research & strategy Alexandra Gray.

While institutional investors are overweighting more to property as they become affected by the equity market, real estate transaction volumes are likely to be softer this year compared to last year, Gray said.

They will be watching to see how the year plays out in terms of real estate, she added.

However, there is a strong weight of capital in Australia, with money going into property every week, Gray said. 

There is still demand from some superannuation funds for real estate assets, she added.  

Lasalle regional head of research and strategy Paul Guest said institutional real estate investors should look to invest in undersupplied real estate in Queensland and New South Wales, as rising incomes across the Asia Pacific lead to an influx of overseas business and leisure tourists. 

The expansion of middle-class incomes in Asia Pacific is leading to more business and leisure travel into Australia, and institutional investors should invest in under-supplied retail areas like Sydney and Brisbane to take advantage of that growth, Guest said.

The growth was feeding directly into demand for hotels and logistic realty, he said.

Gray said stricter legislation in New South Wales and tighter bank requirements were leading to an undersupply in real estate.

Geography restrictions are also leading to an undersupply in Sydney, according to Guest.

Rising incomes were also outmatching the appreciation of the Australian dollar, he said.

The supply gap will run through next year and 2014, Gray said.