AVI Journal

VALUATION JOURNAL ISSUE 1 2021

Minority Share Valuations

James d’Apice weighs in with legal analysis & case law

Climate Change & Valuation The impacts of climate change on property valuation that you need to know before investing

Industry Automation

We discuss how automation is impacting valuers and what implications this will have

Valuation Industry Issues Chairman Paul Waterhouse gives his take on emerging industry issues

Data & Valuation This issue examines new technologies, emerging industry issues and the use of data in valuation practice.

FEATURES 01

Valuation Industry Issues Chairman Paul Waterhouse gives his take on emerging industry issues

02

Minority Share Valuations James d’Apice weighs in with legal analysis & recent case law developments

03

Climate Change & Valuation Amanda Stone discusses the impacts of climate change on property valuation that you need to know before investing

04

Industry Automation We analyse how automation is impacting valuers and what future implications this may have

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TABLE OF CONTENTS 03

Chairman’s Address An introduction to the journal & an AVI update for members

05

Climate Change & Valuation An analysis of how climate change will impact property valuation

07

Interview with James d’Apice James discusses minority share valuations & fair vs market value

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Interview with Paul Waterhouse Paul Waterhouse, AVI Chairman, gives his take on industry issues

13

The Future of Valuation An assessment of the future of the valuation profession

15

General Property & Economy Overview A brief summary of the performance of the property market overall

17

Commercial Property Market Update A brief analysis of the recent performance of commercial property

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THE CHAIRMAN’S ADDRESS

I would like to welcome our readers to the first issue of the monthly AVI Valuation Journal. The Australian Valuers Institute (AVI) have launched the journal with the intention of creating a resource for discussion, analysis, research, information and news relating to property and business valuation. Our objective is to give our members a professional platform that promotes education in the valuation industry, with a focus on member submissions, interviews and original content.

Reflecting back on the previous year, COVID-19 has presented many challenges in the valuation industry - adjusting to working remotely, disruption to the operation of courts, difficulties with inspecting properties, impacts on the value of assets and an increased reliance on online technology. However, I would like to congratulate our members on the resilience that they have demonstrated over the past year. I am proud to announce that the valuation industry has been doing better than ever and I am confident that our industry can adapt in ways that will allow us to overcome the challenges posed to us in the future.

We aim to offer more Continued Professional Development (CPD) courses and informational seminars to members in the coming year. We recently hosted the National Property Data Workshop & Seminar which addressed the importance of data in property valuation practice and property data solutions. Another event that we recently hosted with Climate Valuation was a seminar discussing the impacts of climate change on property valuation. We have used the pandemic as an opportunity to make changes to our delivery of CPD courses to ensure that our regional and nonNSW members have more access to these opportunities. We hope to provide further accessible educational online courses and seminars to our members as the year progresses.

Finally, we would like to give a big thank you to the members who have made contributions to this month’s issue. We rely on your submissions to create an engaging newsletter with diverse, educational content that represents important issues, challenges and news in the valuation industry. We would also like to thank our readers, who provide helpful feedback for the direction for the journal. We wish you all a great start to 2021 and look forward to receiving your contributions.

Paul Waterhouse Australian Valuers Institute AVI ISSUE 1

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The AVI Valuation Journal is published by the Australian Valuers Institute as educational material for its members. At times, the AVI Valuation Journal publishes technical material to assist professional practice which is supplied by contributors and third party sources. We accept no liability for any information, opinions, outcomes or the effectiveness of any formulas or calculations contained in articles included in the AVI Valuation Journal. Whilst care has been taken to ensure accuracy, we strongly advise readers to seek independent, specialist advice on matters concerning business practice, financial outcomes and legal implications and to conduct their own investigations into any information included in this journal. Further to this, any comparable sales evidence included in this publication should only be treated as a guide/’check method’ and we do not accept any liability for any inaccuracies or misreporting of comparable sales. We strongly encourage members to source their own comparable sales evidence to support any conclusions made in valuation reports. Any members who are seeking further information on the topics and valuation methodologies covered in this journal are encouraged to contact the editor.

THE EDITOR Kristy Kerswell PO Box Address: PO Box 6219, Frenchs Forest NSW 2086 Phone Number: 1300 748 506 Email: admin@valuersinstitute.com.au AVI ISSUE 1

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Property Valuation & Climate Change

How will climate change impact property values?

Amanda Stone

Amanda Stone from National Property Data discusses the impact of climate change on property values and the factors that investors and valuers should take into consideration when assessing long-term investment viability.

As Australians, 2020 taught us a lot about what it means to live in a country with an evolving and unpredictable climate. We saw devastating fires in January give way to ferocious storms and flash flooding in February.

November’s heatwaves scorched from coast-to-coast, and beaches disappeared in December. All of these concerning climate events occurred after the Climate Council released a startling report claiming, ‘the property market is expected to lose $571 billion in value by 2030 due to Climate Change.’

Whether you believe the Global Warming science or view it as more ‘fake news’, as property valuers, it will become increasingly important to consider the potential implications of changing weather patterns in years to come.

When Climate Change activist Greta Thunberg said, ‘I want you to act as if the house is on fire, because it is,’ she wasn’t only addressing property valuers, however recent events have demonstrated just how relevant her advice is. With fires, floods, drought and erosion AVI ISSUE 1

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increasingly devastating our country, a comprehensive valuation is incomplete without considering the risk of property damage resulting from changing weather patterns.

In assessing vulnerability, the Climate Council reports, ‘low-lying properties near rivers

“It will becoming increasingly important to consider the potential implications of changing weather patterns and their impact on property value” and coastlines are particularly at risk’. In July of 2020, we saw exactly what this looks like, as several luxury homes in NSW, crumbled over eroded cliffs into the ocean below. If risk of property damage is not enough to influence property values, perhaps council rates and rising insurance premiums will

be. The Department of Environment recently report that more than 160,000 homes in Australia will be put at risk of damage if the sea levels rise only 1.1 metres.

Many coastal towns are already mapping out areas of high-risk, with rate rises proposed now to help improve protections for homes, before disaster strikes down the track. Similarly, the Climate Council predicts insurance premiums for properties in high-risk areas will continue to rise, with ‘one in every 19 property owners facing the prospect of premiums that will be effectively unaffordable by 2030’.

The ability to align climate change insights with specific properties allows a valuer to consider just how the risk of damage and increasing costs may affect property values.

Whilst kids skip school to protest climate change inaction, governments tip toe around the specifics of their strategies, and Australia battens down for the next round, valuers can rely on emerging data to provide accurate property valuations for

today, and tomorrow. ‘Combining climate change data, calculated from simulations, trends and forecasts, with existing market intelligence, from property design specs and construction materials to elevation and topography, will allow valuers to deliver more insight into the future of a property’s value,’ says Don Harb of National Property Data.

‘Property buyers can benefit from a better understanding of a property’s vulnerability, based specifically on its construction, and the probability of extreme weather events that threaten a location.’

Climate valuations not only report on vulnerabilities of specific properties, but can also be used to recommend improvements that will increase resilience. In further enhancing its property data platform, National Property Data will partner with key sources for Climate Change insights, enabling valuers to produce more comprehensive valuations, with just a few clicks.

National Property Data is committed to collaborating and consulting with everyday experts in the industries it serves. In January 2021, the company held a workshop with 75 AVI members to learn about property data needs for valuers.

We would love to hear your thoughts on climate change data valuations useful or not?

Reach out to Rich at rpartington@nationalproperty.data. com.au to learn more about property data exclusives for AVI members.

A SUMMARY It will become increasingly important for valuers to consider the impacts of climate change on properties and how they will influence value Climate events significantly increase insurance premiums and lead to rate increases The Climate Council reports that low-lying properties near rivers and coastlines are particularly at risk Climate valuations will not only report on vulnerabilities of specific properties, but will facilitate the recommendation of improvements and steps that can be taken to protect vulnerable properties AVI ISSUE 1

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An interview with James d’Apice

BY KRISTY KERSWELL

James d’Apice is an experienced corporate and commercial litigator who is based primarily in Chamberlains’ Sydney Office. Outside of the courtroom, James hosts a video and podcast series called “Coffee and a Case Note” that offers easily accessible, brief analyses of interesting developments in case law. We interviewed James and asked for his thoughts on the role of valuations in minority shareholder disputes and how to navigate business valuation issues in litigation.

Q: You mentioned that the area of minority shareholder disputes and valuations are an area of interest of yours. What has drawn you to this area?

A: Shareholder disputes get to the very heart of capitalism, frankly, because they relate to the question of ownership. And when we speak about how the contemporary economy has come to exist, it’s tough to look past the company for the past 300 years or so as being anything other than fundamental to that, it is how individual people can essentially pull their funds together, to have vaccines for diseases to have supercomputers in your back pocket that can make phone calls, to have jets that don’t fall out of the sky, and all this sort of amazing stuff.

So shareholdings are one of the fundamental building blocks of the society we have. What AVI ISSUE 1

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interests me in relation to minority shareholder disputes, is how legal status of ownership can rub up against what is a natural human desire, and certainly a natural commercial desire, to want to control what that entity does. So, one of the

“Work your lawyers harder, because I think that if we are worked hard, we can add value to the valuation process” things, as I say, that really interests me is that tension between the economic and structural, and then the tension between the human and emotional, and I find that the tension between those two things is a really interesting area to operate

in, because you are using both sides of your brain and you are thinking about distinct issues whilst simultaneously trying to solve problems.

Q: In your experience, what are some of the issues that arise in business and share valuations that are used in litigation? Do you have any suggestions on how valuers can navigate these issues?

A: I mostly see two kinds of issues and both of them relate to misunderstandings on the part of lawyers generally. The first issue is the distinction between fair value and market value. I think that distinction is really fundamental, as it is critical when trying to pick apart how we arrive at a number for an entity or company.

The second set of issues relates to defining a company’s assets and this is especially relevant when we

are thinking about minority shareholder disputes, as we are often looking at closely held companies, with only a few people involved at maximum. We often come across the issue of loans that move between these entities that relate closely to each other, which means we have limitation and division 7a issues looming in the background. This creates a forensic element of examining each of these claims, assets and liabilities.

As lawyers, we can’t add much value when it comes to selecting valuation methodology, but I think that we can assist by encouraging experts to turn to us and say ‘look, you’ve instructed me to prepare this report, or to appear as a witness, but I need to hear more about this loan or tax issue’. So, my advice to valuers would be to work your lawyers harder, because I think that if we are worked hard, we can add value to the valuation process.

A SUMMARY A critical consideration is the distinction between fair value and market value.

Whilst market value represents the value of an asset on the open market, fair value approaches the value of an asset from a hypothetical perspective that assumes no shareholder oppression. There may be some disagreement as to which basis of value should be used when it is not specified in the shareholder agreement.

When preparing a business valuation report for court proceedings, a critical consideration is determining the assets and liabilities of a company. Ask your instructing lawyers for information when the nature of assets and liabilities are unclear, as it is important to seek clarification. You should factor this information into your assessment of value.

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Q: Do you have any tips for where there’s a paucity of information and where the issues are ambiguous?

A: I think that what you are describing is something for instructing lawyers to deal with. I think that a valuer can really assist in that area by being aware of the rights that the lawyer’s client may have to request more information.

If you have the smallest understanding of what a notice to produce is, and if you’re able to assist the lawyer on documents that you suspect might exist, ask for them. If the answer is no, that might be a really effective conversation for highlighting another issue for both lawyers.

Q: What factors impact whether you pay fair market value for minority shares?

A: This is not an issue that confuses valuers, but it is an issue that confuses lawyers and occasionally accountants.

When we talk about fair value and market value, we are talking about two different concepts.

Let’s take the example of a company that runs a sandwich shop, where the majority shareholder owns three shares, and the minority shareholders holds one, and the company has only issued four shares. The valuation of the company might be

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$1,000,000. There’s an argument that the minority share might be worth $250,000 on a fair basis, but there’s a counter argument that says these shareholders don’t get along and the majority shareholder prevents any purchaser who may buy them from extracting any value.

In this situation, no one will buy out the minority shareholder, so the market value is zero or vastly reduced. In some areas of law, for instance, corporate oppression, the court will look to determine a fair value. In this case, the value does not take into consideration the oppression and does not envisage an open marketplace.

This issue sometimes arises in shareholder’s agreements that do not specify the method of valuation.

Q: Do you think that there are emerging issues in this area of law?

A: What I do think is emerging is volume and we are seeing more and more of these disputes directly at our firm, and part of that is because we are now focusing on that as an area of practice. More broadly, I think that we are seeing increasing use of companies as entities for running small businesses, for other special purpose vehicles and holding investments, and for tax effective and asset

protective family management uses.

As we see more and more of these companies, we see more and more of these tensions arise. So this is perhaps not an emerging issue that may lead to a change in the law, but rather it is an emerging issue due to how often these issues are coming forward.

Q: Chamberlain’s have undergone a large expansion and have adopted a new and innovative approach towards sharing legal education resources.

Can you tell me a little more about this, and what it has meant for the firm?

I joined Chamberlains in 2020, in the midst of COVID. At the time, Chamberlain’s had this motto, ‘we’re with you’. When I joined the firm, I was initially cynical because I thought, well, of course any law firm is going to be with their clients, because the clients are paying them to be there.

What I have learnt since coming to the firm as more time passes is that Chamberlains really employs this approach quite broadly.

We apply it to our colleagues internally, through mental health initiatives. We apply it with new people who come to join the firm, and we want to be a firm that really help

people to move forward and march onwards with their career. We employ it with experts, we employ it with referral sources, and we employ it with valuers. I think that this approach has persisted even despite the firm’s recent growth, and I think that this really enhances the quality of the firm. As we’ve grown, I think we’ve gained expertise that puts us very much at the front of the marketplace, causing us to become a firm that can be compared to anyone in any sphere. It is a very exciting time for the firm.

If you have any questions or concerns regarding these issues, contact James d’Apice on 02 9264 9111.

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INTERVIEW WITH PAUL WATERHOUSE

Valuation Industry Challenges

algorithm in terms of quality, especially in the case of contested residential property valuations.

The role of a valuer involves putting yourself in the shoes of a potential purchaser and identifying what would be Paul Waterhouse is the Chairman of the paid for an asset in a hypothetical AVI and the Principal at Waterhouse marketplace. Home purchases are often Property and Business Valuers. Paul has emotive, and the nuance of what over 15 years experience performing determines value is often lost when property and business valuations, and he comparable sales are approached from a takes a special interest in the way that rigid, data-driven perspective. I think that valuation interacts with legal and property valuers should capitalise on this accounting issues. We sat down with and play to this strength. Downward Paul to ask about his thoughts on the pressure on fees poses a threat to the industry and his advice for valuers. quality of valuations, as when fees are not in line with the scope of the work, corners are cut and clients have worse outcomes. I would recommend that all valuers focus on quality over quantity, and I would suggest that when acting in disputed matters, all precautions are taken to ensure that an excellent product is produced e.g. inspecting the property in person. I would encourage valuers to move away from mortgage valuations, which are based on volume, towards valuations prepared for court proceedings and settlements, which are based on the quality of your report, evidence and your valuation expertise.

Q: What are some challenges that need to Q: What do you enjoy most about your be overcome in the valuation industry? career in the valuation industry?

A: One of the biggest issues that valuers A: What I most enjoy about valuation is that have been facing recently is downward it encompasses a vast range of areas. From pressure on fees. I think that in order to property to business to intellectual combat this, valuers need to recognise the property, valuation is an incredibly broad value that their services bring to clients industry with a vast amount of and price them accordingly. Whilst property information and comparable sales methodologies and factors to take into consideration for different asset types. No evidence have become more readily valuation is the same, so you receive available to the public in recent years, exposure to a wide range of approaches there is no substitute for the opinion of an and objectives. I think that this is an experienced valuer, especially in court incredibly intellectually stimulating job that proceedings. An opinion of value prepared ensures that you are continuously by an experienced property or business developing as a professional which is one of valuer cannot be compared to an the best parts of the industry for me. automated valuation generated by an AVI ISSUE 1

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Q: If you could give yourself some advice at and established valuers with skills that are in the beginning of your valuation career, what demand in the industry. We have recently launched the courses “Expert Evidence: the would it be?

View from the Bench”, “Determine Valuations for Rating & Statutory Requirements”, “Give A: I would tell myself to approach each Evidence in Legal Proceedings of Property valuation with an open mind. As humans, we often have a propensity towards making Related Matters” and “Produce Valuations for Fractional Interests in Property” which teach assumptions and relying on first valuers how to best approach legal and impressions. I think as a valuer, it is accounting valuation issues and offer value to important that all opinions about value are the client. based on evidence, and that all preconceived notions are challenged. I Whilst COVID has been challenging for the think it is also important to be humble AVI and the industry as a whole, I think that about your ability as a valuer, as arrogance and rigidity can lead to mistakes. The key to we have adapted well and that government restrictions have forced us to invent accurate valuations is approaching the task innovative solutions to providing continuing of assessing value from a range of professional development and education. perspectives.

Q: This issue of the Australian Property & Business Valuation Journal discusses the changing role of the valuer and the impacts that automation will have on the profession in coming years. As Chairman of the Australian Valuers Institute, what is the Institute doing to assist valuers with this?

“Approach each valuation with an open mind”

A: In my view, specialised or complex valuations will always require an experienced Certified Property or Business Valuer. I think that whilst we have seen some limited success in the area of automating residential property valuations, the valuer will always play an important role in determining the value of an asset.

However, that being said, the AVI is dedicated to ensuring that our members are always prepared to meet the constantly changing demands of the industry. In 2020, we launched the Valuers Training Institute, which was designed to offer online valuation CPD courses that equip aspiring

We hope to develop more CPD courses that assist valuers to incorporate data better in valuation practice. We would especially like to assist valuers with capitalising on emerging property technologies.

Would you like to learn more about valuation, or do you need to satisfy your annual CPD point requirements? Visit www.valuerstraininginstitute.com.au or call 1300 132 653

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INDUSTRY ANALYSIS

BY KRISTY KERSWELL

The Future of the Valuation Industry We discuss what the future holds for the valuation industry and the impacts of emerging technologies on property & business valuers.

The valuation profession faces significant challenges as more valuation processes become automated, and the role of the valuer becomes more one of data handling and information processing than a property analyst. In response to these industry changes, the role of the valuer must adjust to respond to the industry’s needs. Research suggests that the skills profile of the valuation profession has changed, therefore valuers must adjust and acquire the skills and qualities that will be needed. As new knowledge fields and specialisations emerge, the profession must adapt to this.

It is said we are undergoing a period of immense change in terms of technology and emergence of artificial intelligence (AI) and that this is having a great impact on professionals.

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The valuation profession is facing significant challenges as more valuation processes become automated, and the role of the valuer evolves to become data handling and information processing, rather than of economic analysis. In the past, the availability of data was a critical aspect of valuation and the valuers’ main strength was the data they held, or the contacts they could use, to gather publicly unavailable information required in valuations. Rapid growth in the areas of information and communication technology (ICT) have meant that more and more information is available from different sources to more and more people, thus shifting the role of valuers from data brokers. It is no longer the availability of data and market knowledge that differentiate valuers, it is in fact what they do with the

data that differentiates them from their counterparts.

Client demand for property valuations have moved from providing single valuation opinions and have been increasingly moving towards providing complex and broad market analysis, accurate future value predictions, and risk pricing which require valuers to broaden their knowledge and expertise. With the increased availability of publicly available data, the mortgage industry is moving to the ‘science of valuation’ and the valuation profession is best described as ‘caught in the middle’.

To survive in this competitive environment, valuers must broaden their skill sets and develop specialisations in different areas in valuation. The areas of pubs, hotels, motels,

nursing homes, retirement villages and leasehold interests require specialist experience and valuation methodologies, making them interesting areas for valuers to look at. Concerns in this vein were raised by Chief Executive Mike Zissler in 2016, when he suggested that valuation companies have been “pitted off against each other under pricing, and prices have been forced back to 1980’s rates, yet so much more work and prescription is now required”.

Another significant challenge in the property valuation industry is an ageing membership and difficulty attracting new, talented individuals into the profession. There is a demographic time bomb in the valuation profession because a significant number of property valuers who are members of valuation professional bodies such as the Australian Valuers Institute (AVI) will retire over the next ten years. This has raised questions as to where the next generation of valuers will come from. As members of industry bodies retire and subscriptions are lost, the profession will lose its ability to lobby, and to promote its members and their services, thus it is vital to attract new talented

Even the universities that offer valuation education are under increased pressure as small, niche programs such as valuation are struggling for their survival since universities have been looking carefully at their own cost management.

“We are undergoing an immense period of change ... in the valuation industry” individuals into the profession as there is strength in numbers. This will have huge implications and will significantly impact the way that the profession defines, educates and markets itself and the way that clients perceive the industry. This is also a particular problem within academia, whereby an aging teaching profession has become a visible barrier in attracting young people into property valuation programs in the tertiary sector.

The valuation profession has had difficulty recruiting young people as it lacks the allure of more established careers, and many accredited universities do not offer valuation related degree programs as they are a relatively new phenomenon.

The emergence of valuation as a university degree is only a recent phenomenon, and it appears as though this style of education may not be suitable for those seeking to enter the profession. Previous generations of valuers were educated via TAFE, where there was a focus on physical inspections and report generation.

Recent university graduates lack the specialised firsthand experience that their predecessors gained during their studies.

Attracting property graduates into valuation has also been a challenge, as most property programs feature general degrees that only briefly cover valuation practice, and many graduates of eligible degrees opt to work in other areas, such as property financing and portfolio management.

The future of valuation poses many challenges to members of the profession, and right now it is not entirely clear how these can be best navigated.

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Whilst there have been substantial detrimental financial impacts due to COVID-19, we have seen winners and losers across different market segments.

Property Market Update & Overview

BY KRISTY KERSWELL

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Overall Economic & Market Analysis We have seen many economic records broken in 2020, however in the global context Australia is one of the top performing economies for GDP and unemployment. Whilst the retail sector has been one of the most affected sectors during this pandemic, not all retail sectors have been impacted equally. This crisis has required retailers to adapt rapidly, with some forced to change established business models overnight.

Those that have been able to adapt rapidly to changing consumer demands have weathered the pandemic well. Some have been lucky that they service categories which have seen increased demand during the pandemic. Whilst there have been substantial detrimental financial impacts due to COVID, we have seen winners and losers in different market segments.

In Sydney and Melbourne’s residential market, we have seen rundown properties selling for millions; big crowds showing up at auctions, and reserves being smashed. House prices in Australia jumped by 2.1 per cent in February, the biggest month-on-month gain in almost 18 years according to CoreLogic’s national home value index.

The unprecedented amount of government stimulus unleashed to nurse the economy through the pandemic crisis has proven very favourable for residential property.

Over six months into COVID-19, the data to support the economic impacts of the pandemic is starting to illustrate the severity of the pandemic on the Australian economy. The GDP quarterly numbers for the June quarter reported the largest fall in quarterly GDP ever recorded.

Economic activity contracted by 7% in the June quarter which was slightly worse than most economic forecasts. However, in the global context Australia has performed reasonably well.

Much of the contraction in GDP was due to a substantial fall in household expenditure which fell over 12%. Government stimulus has assisted with this, however we saw household savings jump from 6.0% to 19.8% in the quarter.

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PROPERTY MARKET ANALYSIS

Commerical Property Market Analysis & Overview

Commercial Property Market Analysis & Overview Property as a whole remains an attractive asset class, particularly when comparing yields to bond rates, combined with the current low interest rate climate. With the Reserve Bank of Australia slashing the official cash rate to a record low of 0.10% in November, and further quantitative easing measures introduced, we will see bond yields fall closer to zero. The COVID-19 pandemic has impacted all property asset classes in Australia to some extent, with both positive and negative outcomes. The retail sector has been the hardest hit as a result of store closures AVI ISSUE 1

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which have caused reduced foot traffic and weak consumer spending. However, as restrictions have been eased and locally acquired cases have reached zero, consumer sentiment has recovered and physical retail consumer spending has recovered.

Total returns for the sector were recorded at -9.4%, with capital growth falling -13.1%.

This evidences the fact that retail as an asset class will continue to face the greatest amount of challenges throughout this recession, and despite a lack of forced sellers currently in the market this will likely change in the next 6-12 months as government stimulus packages such as

JobKeeper and JobSeeker which have helped to keep unemployment relatively low, continue to reduce and near an end. Insolvency experts predict that forced sellers will not come in an avalanche, but will be instead spaced out across a period of one to two years.

trade both on and off-market throughout the year. Total returns for the office sector were recorded at 8.0% in the 12 months to June, falling below double digits for the first time since 014. This was mainly due to a drop in capital returns to 2.8%, down from a peak of 8.8% in 2018.

Industrial property has been High demand for Quality a prime beneficiary of the Office Assets in Australia shift in consumer spending, Continues which has translated to Foreign investment has been strong investor interest in well located warehouse and a key feature of Australia’s office market over the last storage facilities which decade. Funds from Asia, service densely populated areas. Domestic institutional Europe and America have demonstrated strong players have continued to interest as a result of our aggressively acquire properties throughout 2020, stable geo-political environment where with many funds seeking investments are deemed quality assets to bury into relatively low risk, with 'core' portfolios. Office above average capitalisation assets have continued to

rate yield returns. This stability has been further emphasised and evidenced by the government’s handling of the pandemic, which has allowed us to keep case numbers and deaths low in comparison to the vast majority of developed nations around the globe.

However, it is likely that we will see foreign investment into Australia decrease in the short term, with temporary changes to FIRB policies having an impact on the timeframe and completion of foreign investment in Australia.

This was reflected in the office sales volumes throughout 2020 which were nearly half of those from the year prior. In the 12 months to September 2020, Savills recorded AUD $12.6 billion of office transactions (above AUD $5 million).

Domestic institutional groups remained the most dominant purchasers over the last 12 months, contributing close to 42% of total volumes (in dollar terms).

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