“The initial Shariah money came from Malaysia which has been [one of] the top five investors in the Australian market and this started the process of understanding Shariah financing in Australia and groups being interested in participating in providing capital on that basis,” explains Michael Dowling, a partner and the head of Australia for 90 North Group, a Shariah real estate specialist, to IFN.
While Malaysian Shariah investments into the Australian property markets continues to be strong — Lembaga Tabung Haji, the country’s Hajj pilgrims fund, this year allocated RM2 billion (US$476.82 million) to invest in real estate in Australia and the UK over the next three years — investors from the GCC are also making their way Down Under.
“In the last six months, we’ve seen a significant interest from the Middle East — Saudi Arabia and Dubai in particular — considering capital on a Shariah basis,” Dowling confirms. “We are very hopeful of the Middle East market and we think the market will continue to grow dramatically in terms of providing Shariah capital to Australia.”
The appeal of the Australian property market is unsurprising. Australia, the only economy in the world which has not had a technical recession over the last 26 years, has strong economic fundamentals which have anchored its real estate segment in solid foundations bolstered by generous tax breaks for landlords and a robust legal infrastructure.
“Australia tends to work within very safe parameters when commercial development is undertaken and that is driven by the banking sector so it is not really possible to build speculative projects in Australia — you can’t build something unless it is already pre-leased otherwise you won’t be able to get financing,” shares Dowling. Similar constraints also apply to the residential sector.