An Eye to Normality – Tourism and Immigration
18th February 2022Agriculture Commercial Real Estate Investors Market Review
Immigration and tourism are critical driving forces behind Australia’s economy.
For the past 15 years’ Australia has relied on net overseas migration to contribute more each year to population growth than natural increase. Further, the visitor economy at its height in 2019, was generating $166 billion in total earnings. In order to fully return to ‘business normal’, the movement of people to Australia and around Australia & New Zealand is critical to underpin economic conditions.
While December 2021 overseas arrivals were at the highest volumes since international travel restrictions were introduced in March 2020, they remain roughly equivalent to 10% of December 2019 visitor numbers at 197,000 overseas arrivals. It is anticipated these visitor numbers will build with improved international access to Australia as the country reopens to all fully vaccinated visa holders from 21 February 2022 and New Zealand in the back half of 2022.
For the agricultural sector, improved overseas arrival numbers and domestic travel will help reduce some of the supply chain challenges currently driven by labour shortages. Our agricultural credit investments have continued to perform in this market, with any operational issues largely offset by buoyant commodity prices and the balance sheet strength from rising land prices.
For the Commercial Real Estate industry, population growth and immigration levels are a key demand driver for the residential housing market. A strong return of immigration is expected by Q3 2022, with medium-to-long term demand expected to support the rezoning of more urban-fringe land to residential to meet 15 year supply. Merricks Capital has recently invested in a land opportunity on the urban fringe within Victoria’s Western Growth Corridor.
As state borders reopen, we have seen our investment due diligence timeframes revert back to normal (3-5 weeks). This week we settled a $103m (NZD) investment in Mangawhai, New Zealand. The Loan will fund the development of a new town centre project, including main street retail, Bunnings and a New World Supermarket on the 130 hectares of land. The investment has a peak Loan to Value ratio of 55% and is forecast to return an investor IRR of 11.6% (net of fees and costs).
Changing Tide – Spending vs Saving
Immigration and tourism are critical driving forces behind Australia’s economy. For the past 15 years’ Australia has relied on net overseas migration to contribute more each year to population growth…