AUSTRALIAN COMMERCIAL property is an attractive investment choice according to Ernst & Young real estate analyst Chris Lawton. 'The Australian commercial market is highly competitive, with a substantial proportion of investment grade retail, office and industrial property already held by Listed Property Trusts and other institutional investors. 'The relative size of Australia's Listed Property Trust sector [Australia has one of the most securitised property markets in the world], while creating substantial competition for assets, also ensures there is significant analysis of all major property classes. The regulatory framework is well established and includes a well developed titles system that provides a high level of certainty for investors,' Mr Lawton said. Despite the opportunities, Mr Lawton cautioned, however, that foreign investors needed to address carefully the risks associated with investing in the Australian market. 'It's important to partner with someone who knows the local market. In terms of tax and regulatory requirements, engaging local advisers with experience in not only the domestic Australian property market but also in dealing with cross-border transactions is an important consideration. 'Australia's property markets are subject to a number of state- based regulatory requirements and taxes that vary across the country. For example, stamp duty and land tax are levied at differing rates by different states. A number of regulatory requirements, such as zoning laws, also vary,' Mr Lawton said. He said investors also needed to understand Australia's federal income tax laws and how they interacted with tax requirements in their home country. 'For example, investors should consider the terms of any tax treaties between the home country and Australia to assess the tax impact on expected returns. 'It's also beneficial to engage advisers who have a national capability and who can therefore not only assist with investment opportunities across the country, but also understand the specific state and city requirements,' he said. Foreign investors also needed to consider their approach to currency risk. 'In terms of managing currency fluctuations there are a number of hedging strategies an investor can consider, including borrowing in Australian dollars to finance the asset, therefore providing a natural hedge, or entering into forward currency contracts to hedge against currency movements. The implications of each strategy need to be carefully considered,' Mr Lawton said. He said despite these risks, Australia had one of the most transparent property markets in the world and a stable political environment, making it a strong candidate for foreign investment.