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Australian superannuation funds look to Europe for real estate investment

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GLOBAL - Europe has become the most attractive region for Australian superannuation funds when it comes to making foreign real estate investments, according to the Centre for Investor Education (CIE).

A poll of investors carried out at CIE's real estate investor forum in Queensland showed that Europe was the second most attractive region after Australia for real estate investments, while Asia was the last appealing.

The findings revealed a shift in favour of domestic property over the last 12 months among superannuation schemes, but also greater interest in Europe to the detriment of Asia and North America.

More than half (51%) of attendees at CIE's Real Estate forum selected Australia as the most attractive real estate region, compared with 35% in 2011, while a quarter chose Europe (21% developed markets, 3% developing markets) compared with 9% in 2011.

Only 7% selected Asia, compared with 30% in 2011, while North America was down from 26% last year to 18% in 2011.

CIE, which operates a number of educational investment forums for the superannuation and pension fund industry in Australia and New Zealand, found that the lack of interest in Asian real estate was mainly driven by a lack of transparency in real estate.

Asia remains a region of interest for other asset classes, with 32% of attendees at CIE's Real Estate forum deeming it attractive over the next 12 months and 48% over the next five years.

A lack of transparency and concern over asset valuations were identified as the "key contributing factors" in the shift away from Asian real estate, according to a CIE report.

The report said: "There was an agreement that building trust and possessing local knowledge is crucial when entering a new investment destination, with attendees at CIE's Real Estate forum [citing] information symmetry as the biggest challenge when accessing foreign markets.

Jamie Nemtsas, co-owner of CIE, said: "Perhaps the most resonant takeaway of this year's property forum was the acknowledgement that if funds are to effectively implement global real estate in the future, preparation must be completed now by devising the right investment policies to maintain the appropriate levels of control and flexibility, minimise foreign exchange risk and implement tax efficient structures."

The forum also highlighted concerns over pricing in the Australian real estate markets despite investors becoming increasingly focused on their domestic market.

The majority (77%) of attendees at CIE's Real Estate forum indicated some concern that core Australian real estate was already at fair value or maybe even overvalued, CIE said.

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