08.02.2019 at 01:19
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Chinese Buying A Huge Chunk Of New Developments

New report claims the Chinese bought a whopping 31% of residential developments in 2018.

Some of our readers scoffed when we wrote about the amount of Chinese investment in Australia, but it has likely been considerably more than they thought.

UK-based real estate firm Knight Frank has released its latest report on Chinese real estate business in Australia, covering the last year.

While the Foreign Investment Review Board has been approving fewer foreign investments, Chinese investors still bought $1.3 billion worth of development sites in 2018.

That is down from the $2+ billion they bought in 2017, but it still represents 31% of the commercial development sites for the year 2018.

Of the sites purchases, 41 per cent were low-density residential such as houses, which is 12 percent higher than the 29 percent in 2017.

Nearly 11 per cent of all new apartments built in 2018 were by Chinese developers.

Michelle Ciesielski, head of residential research at Knight Frank Australia, said that even though they were faced with challenges, the Chinese have "ramped up" their Australian investment over the last 5 years.

"Chinese outbound investment has [been] impacted by the Chinese government attempting to moderate capital outflow, as well as from Australia's domestic banks restricting lending to offshore borrowers.

"The current challenges being faced by local developers include changes to Foreign Investment Review Board (FIRB) rules and the Australian Prudential Regulation Authority (APRA), which are encouraging stricter lending practices for investors.

"There has also been the introduction for state-based surcharges."

Most of the apartments are in the Eastern cities of Brisbane, Sydney and Melbourne. Ms Ciesielski said that investment might slow down a bit this year, but is expected to rise to 22 per cent by 2021 in the major cities.

"Projects submitted for development approval and those already with approval, but not yet having started marketing campaigns, tend to taper off substantially for Chinese developers, with less than 6 per cent of total projects in the pipeline.

"This includes those projects which have already commenced and those with development approval which are currently being marketed. With current headwinds heading into 2019, the likelihood of all projects proposed by Chinese developers going ahead over the next couple of years is diminishing, except those with an exceptional product."

But it is still a considerable slice of the Australian pie.

Dominic Ong, who is Knight Frank head of Asian markets, said Chinese developers are diversifying their portfolios.

"Over the past year, the likes of Zone Q, China Poly Group, Yuhu Group and Aqualand have increased their exposure to office assets and this trend is likely to continue in 2019."

The whole report, titled "Chinese Developers in Australia", is available to read here.

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