Despite expectations of a strong merger and acquisition (M&A) activity in Australia for 2017, potential limits on foreign investments may lead overseas capital to be directed elsewhere.
Investment in commercial real estate, infrastructure and energy are some of the industries that may be negatively affected by the proposed regulations. Infrastructure investors, for example, seem to want more M&A deals, even if the outlook continues to be good for the country.
A wave of takeovers among smaller companies could also contribute to advancing privatisation in the infrastructure industry, partly as a way to cut public budget deficits.
According to Thomson Reuters data, M&A transactions in power, infrastructure and transportation accounted for around 30 percent of deals worth US$120 billion announced to date in 2016. For 2017, the majority of Australian investors expects the year to be a good one for M&As.
However, authorities have become wary of overseas investors, particularly from China and Hong Kong, based on national security issues. One example includes the New South Wales government’s decision to sell Ausgrid for A$16.2 billion in local pension funds in October 2016, even as Chinese and Hong Kong investors fielded higher bids for the electricity network.
In terms of real estate investment, a study provided a clearer picture on the longstanding argument whether to buy or rent homes in Australia.
Buy: A Superior Choice
Dominic Crowley and Shuyun May Li’s research paper used a historical perspective to indicate that buying a house is a better choice than renting it. The analysis covered the financial differences between buying and renting over a period from 1983 to 2005 across all capital cities.
An expert from Sentinel Property Group notes that if you’re planning to buy homes and have it rented out as commercial investments, it would be another story. It’s better to consult with property firms to have a more in-depth look at how you can maximise your investment.