KUALA LUMPUR (July 30): Cross-border investment volumes are projected to rise by over 33% in 2H2024, driven by anticipated Federal Reserve rate cuts favouring commercial real estate investments, with Australia leading the region, with a projected 129% increase during the period, according to real estate consultancy Knight Frank.

Meanwhile, for the full year, Australia is expected to attract 36% of total cross-border flows, making it the top destination. 

“In 2Q2024 alone, Australia received US$1.9 billion in international capital, a 2.5-fold increase from 1Q2024,” said Knight Frank Malaysia’s global head, capital markets Neil Brookes.

“The office sector was the main driver, accounting for 63% of total transactions. A standout transaction was Mitsui Fudosan’s acquisition of a 66% stake in 55 Pitt Street for US$879.4 million,” he said in a statement on Tuesday.

Besides, transaction volumes are forecasted to reach 30% in the office sector, with Australia and Japan nearly doubling their 2023 levels. The industrial sector is anticipated to rebound but stay below its five-year average, while India is on track for its second-best year, following 2021.

In the interim, the living sector is projected to exceed its five-year average, with Australia poised for its best year on record.

Touching on the Japan and Singapore front, Brookes noted that Japan is set to attract 23% of cross-border investment flows in 2024, driven by its favourable long-term prospects, while Singapore’s real estate market remains attractive, with cross-border investments making up 48% of total real estate investment volume in 1H2024, exceeding the 10-year average of 43% and reflecting strong global interest.

Delving into the impact of aggressive interest rate hikes that started in the second half of 2022 (2H2022), Knight Frank’s head of Asia-Pacific research Christine Li said it is evident that cross-border investments have sharply declined.

“With yields not expanding fast enough, and assets still being repriced, investors have exercised caution, focusing on opportunities within their national boundaries, rather than pursuing ventures in foreign markets,” she added.