FOREIGN investors continue to flex their strength in Australia's hotel market, with the acquisition of Bounce Backpackers in the Sydney CBD indicative of a rising investment appeal to offshore buyers.
The five-level establishment, voted Australia's best hostel by Hostelworld in 2014, was offered to only a targeted list of competitive investors, eventually selling to a private Chinese buyer for $18.3 million.
Recent research has highlighted an increase in transaction activity in Australia's hotel market, with more than $2.5 billion in transactions completed in the first half of 2015.
The robust appetite for hotel property across the country places Australia second only to Hong Kong in terms of transaction activity in the Asia Pacific region.
CBRE Hotels' Andrew Jackson, who negotiated the sale of Bounce Backpackers, claims the transaction is evidence of the growing appeal of the Australian hotel market to international buyers.
"Australia's hotel sector continues to fly high on the radar of Asian investors, with its relative proximity, economic stability and high growth returns, key fundamentals attracting buyers," he says.
Jackson says a number of mitigating circumstances are changing the way in which foreign investors interact with the Australian market.
"Offshore investors have been traditionally focused on five-star CBD hotel assets, however, a lack of available stock in the top end, coupled with a greater appreciation for the fundamentals Australia provides, has led to increased appetite levels for mid-tier assets," he says.
"We are seeing offshore investors move beyond the traditional areas of CBD-centric hotel markets, with a renewed interest on the regional and suburban market, which was once dominated by the domestic investment community."
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