Property Investors Look Further Afield For Opportunities
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Property Investors Look Further Afield For Opportunities

One of the dominant investment trends of 2023 was more East Coast investors buying in Western Australia for affordability and superior returns

By Bronwyn Allen
Fri, Jan 5, 2024 11:01amGrey Clock 3 min

More investors are looking beyond the neighbourhoods they live in for investment opportunities after the pandemic property boom saw regional markets surge in value at a greater pace than the capital cities, as more people who could work from home left the cities for greener pastures.

McGrath Estate Agents CEO John McGrath said this regional relocation of owner-occupiers opened investors’ eyes to markets outside their own neighbourhoods. Changes in marketing and technology brought about due to lockdowns, such as video inspections, online auctions and signing contracts electronically, helped buyers feel more comfortable with purchasing property remotely. “The prospect of phone bidding and purchasing properties sight unseen is no longer foreign,” he said.

Data from MCG Quantity Surveyors proves that investors are exploring new markets for investment. The latest data for 2023 shows the average distance between where landlords live and invest has ballooned to 1,502km, up from 857km in 2022 and 294km before the pandemic.

MCG managing director, Mike Mortlock, said the data revealed two insights. “Firstly, property investors remain agile and will park their capital in whichever investor-friendly national location and asset type offers the greatest possibility of maximising their return,” he said. “The second is that Western Australia has become the centre of Australian property investment. There’s little doubt its popularity with real estate buyers from the East Coast has increased the gap between home and investment.” MCG data shows 31.86% of Australian property investors bought in Western Australia in the first quarter of 2023, up from just 9.38% in the first quarter of 2022, revealing “a seismic shift away from east coast property investment”, he said.

In 2023, CoreLogic data shows Perth and Regional Western Australia delivered the best total returns (rents and capital growth combined) for investors of all capital cities and regional areas in Australia. Perth’s total return was 20.7 percent and regional Western Australia’s was 14.8 percent. The best-performing regions were Mandurah and Bunbury with 20 percent and 15 percent jumps in home values respectively over the year. Rents in Perth and Regional Western Australia also increased faster than any other area in Australia, up by 13.4 percent and 10.4 percent respectively.

One of the main attractions of Western Australia to East Coast investors is affordability. The Perth house price median is $691,100 and the regional house price median is $398,915. McGrath Estate Agents CEO John McGrath said: “This move towards remote investing has largely been driven by the perception of better capital growth prospects in the regions, and higher rental yields that usually come with more affordable properties.” Investors in regional areas can usually afford to buy houses, which typically deliver better capital growth than apartments, and they can buy with smaller loans, meaning they can manage rising interest rates more easily.

PropTrack recently put together a panel of industry experts and asked them to create a list of 100 suburbs that they think will outperform in 2024. PropTrack economist Anne Flaherty said 40 percent of the suburbs selected were in regional areas. PropTrak director of economic research Cameron Kusher said the selected regional areas were typically close to a capital city or had a diversified economy. “These tend to be key drivers in regional markets and reflect our expectations of the types of locations in regional areas likely to see the strongest price growth next year,” he said.

Here are some examples of the regional cities or suburbs tipped for outperformance in 2024.

NSW – Dubbo

Simon Pressley of Propertyology selects Dubbo. “Decades of official evidence supports Dubbo’s status as an extremely resilient and low risk option for property investors with a budget of up to $600,000,” Mr Pressley said.

VIC – Delacombe, Ballarat

Buyers’ agent Kate Hill from Adviseable says Delacombe is a fast-growing part of the Ballarat West Growth Area and offers strong capital growth potential and good yields. “Ballarat was recently identified by the ABS as the fastest growing inland city in Australia and, according to some forecasters, can expect more strong price growth,” she said.

QLD – Darling Heights, Toowoomba

Home to the University of Southern Queensland, Ms Hill says Darling Heights has a range of amenities and will benefit from Toowoomba’s involvement in the 2032 Olympics. “There is a massive program of infrastructure development underway, planning more than $13.1 billion of infrastructure and major projects, both private and public,” Ms Hill said.

SA – Victor Harbor

Mr Pressley says Victor Harbor is to Adelaide what the Sunshine Coast is to Brisbane. “It has one the highest rates of internal migration in the country. Very popular for the one in five Australians who now derive their income from home, and for retirees.”

WA – Mandurah

“Mandurah is the lifestyle capital of Western Australia because of everything it has to offer without the big price tag,” said Ray White Managing Director, Dan White. “When it comes to property, Mandurah offers something for everyone, from affordable options for first-home buyers to upmarket canal homes.”

TAS – Launceston

Mr Pressley says this regional city has a diverse economy and “one of the best lifestyle offerings in all of Australia”. “Over the last 20 years, the average annual capital growth rate for Launceston houses of 8.6 percent is far superior to Sydney and Melbourne. Rental yields are also superior.”


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Only 5% of U.S. Foundations Invest for Impact, Study Finds
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Few of the U.S.’s philanthropic foundations invest their endowment assets—totalling an estimated US$1.1 trillion—to create positive social and environmental change in addition to high returns, potentially limiting or even counteracting the good such organisations do.

Exactly how few isn’t precisely known. But Bridgespan Social Impact, a subsidiary of the New York-based Bridgespan Group along with the Capricorn Investment Group, a Palo Alto, Calif.-based investment firm founded by Jeff Skoll , the first president of eBay, and the Skoll Foundation, also in Palo Alto, attempted to “get the conservation started,” with a study of 65 foundations with a total of about US$89 billion in assets, according to Mandira Reddy, director at Capricorn Investment Group.

The top-line conclusion: 5% of the primarily U.S.-based foundations surveyed invest their assets for impact. Most surprising is that 92% of these organisations, which have assets ranging from US$11 million to US$16 billion, are active members of impact investing groups, such as the Global Impact Investing Network and Mission Investors Exchange.

“If there’s any pool of capital that is best suited for impact investing, it would be this pool of capital along with family office money,” Reddy says.

The study was also conducted “to draw attention to the opportunity,” she said.

“We want to redefine what philanthropy can achieve. There is massive potential here just given the scale of capital.”

Foundations are required by the U.S. Internal Revenue Service to grant 5% of their assets each year to charity; in practice they have granted slightly more in the last 10 years—an average of 7% of their assets, according to Delaware-based FoundationMark, which tracks the investment performance of about 97% of all foundation assets.

The remaining assets of these foundations are invested with the intention of earning the “highest-possible risk-adjusted financial returns,” the report said. Those investments allow these organizations to grant funds often in perpetuity.

Capricorn and Bridgespan argue that more foundations, however, need to “align their capital with their missions,” and that they can do so while still achieving high returns.

“Why wait to distribute resources far into the future when there are numerous urgent issues facing the planet and communities today,” argue the authors of a report on the research, which is titled, “Can Foundation Endowments Achieve Greater Impact.”

The fact most of the foundations surveyed are very familiar with impact investing and yet haven’t taken the leap “highlights the persistently untapped opportunity,” the report said. It details some of the barriers foundations can face in shifting to impact, and how and why to overcome them.

Hurdles to making a shift can include “beginner’s dilemma”—simply not knowing where to start—and a misperception on the part of large foundations that impact investing is “too niche,” offering opportunities that are too small for the amount of capital they need to allocate. Other foundations are too stretched and don’t have the resources to add capabilities for making impact investments, the report said.

One of the biggest concerns is financial performance. Some foundation leaders, for instance, worry impact investments lead to so-called concessionary returns, where a market rate of return is sacrificed to achieve a social or environmental benefit. Those investments exist, but there are also plenty of options that offer financial returns.

The authors make a case for foundations to “go big,” into impact to realize the best outcomes, and to take a portfolio approach, meaning integrating impact principles into how they approach all investments. To make this happen, foundations need to incorporate impact into their investment policy statements, which determine how they allocate assets.

It will be difficult for foundations that want to shift their assets to impact to pull out of investments such as private-equity or venture-capital funds that can have holdings periods of a decade. But with a policy statement in place, a foundation’s investment team can reinvest this long-term capital once it is returned into impact investing options, she says.

“The transition doesn’t happen overnight,” Reddy says. “Even if there is a commitment for an established foundation that is already fully invested, it takes several years to get there.”

The Skoll Foundation, established in 1999, revised its investment policy statement in 2006 to incorporate impact. According to the report, the foundation initially divested of investments that were not in sync with its values, and then gradually, working with Capricorn Investment, began exploring impact opportunities mostly in early-stage companies developing solutions to climate change.

“As the team gained more knowledge and experience in this work, and as more investment opportunities arose, the impact-aligned portfolio expanded across different asset classes, issue areas, and fund managers,” the report said.

As of 2022, 70% of the Skoll Foundation’s assets are in impact investments addressing climate change, inclusive capitalism, health and wellness, and sustainable markets.

Capricorn, which manages US$9 billion for foundations and institutional investors through impact investments, constructs portfolios across asset classes. In private markets, this can include venture, private equity, private credit, real estate, and infrastructure. There are also impact options in the public markets, in both stocks and bonds.

“Across the spectrum there are opportunities available now to do this in an authentic manner while preserving financial goals,” Reddy says.

Of the foundations surveyed, about 15, including Skoll, have 50% or more of their assets invested for impact. Others include the Lora & Martin Kelley Foundation, the Nathan Cummings Foundation, the Russell Family Foundation, and the Winthrop Rockefeller Foundation.

Though not part of the study, the California Endowment just announced it was going “all in” on impact. The organisation has US$4 billion in assets under management, which likely makes it the largest foundation to undergo the shift, according to Mission Investors Exchange.

Although the researchers looked at a fairly small sample set of foundations, Reddy says it provides data “that is indicative of what the foundation universe” might look like.

“We cannot tell foundations how to invest and that’s not the intent, but we do want to spread the message that it is quite possible to align their assets to impact,” she says. “The idea is that this becomes a boardroom conversation.”


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