Chinese investors are pouring into Australian residential property development sites, snapping up both more sites and increasingly larger sites for development.
In its latest report, real estate services firms Knight Frank said that by value, Chinese investors purchased $2.4 billion worth of residential development sites in 2016.
This equated to 38 percent of the disclosed total of Australian residential sites sold in the year and was up by 12 percent compared with 2015 and 36 percent compared with 2012.
The average size of sites purchased by Chinese developers has grown by more than eighteen times compared with 2012, with the average investor owning sites with an area of 21,045 square meters with an average potential of 502 dwellings per site.
“While the Australian residential market collectively strengthened throughout 2012 and in 2013, growth in sales turnover encouraged prices to rise for local developers and investors alike,” Knight Frank’s Head of Residential Research, Australia Michelle Ciesielski said.
“At this time, the Australian dollar became very favourable against other currencies for investment into Australia. The Chinese renminbi was no exception.”
“Opportunistic developers, many for the first time, considered Australia to build their next development after becoming a household name in homeland China. It was considered, and still is to some extent, worth the risk to build a first-time signature development (even if profitability resulted to just be break-even) to be accepted as a reputable developer by the local Australian market.”
According to Ciesielski, such a trend is continuing, with the amount which Chinese developers and investors having accounted for more than 25 percent of the overall volume of disclosed sales in each of the past three years.
Whilst foreign investors are generally barred from purchasing established housing in Australia, they are encouraged to develop or investing in new construction under federal government rules designed to encourage the creation of greater levels of new housing supply.
Ciesiekski says opportunities for Chinese participation in Australian residential development remain notwithstanding moves on the part of the Chinese government to limit the outbound flow of funds and those on the part of Australian banks to pull back on lending to investors, particularly in light of tighter APRA requirements.
“Long-term strategies must now be devised to allow for the Chinese government tightening the ease of outbound capital flow, and local lenders limiting funding to control their liquidity and satisfy APRA requirements,” she said.
“But one thing is clear – Chinese developers are determined to succeed in Australia, and for many generations to come.”