Investment from China Set to Surge

Tuesday, October 14th, 2014
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Experts from one of the world’s leading realtors say Chinese investment in the Australian property sector will continue to swell as Beijing loosens policies governing overseas purchases and regional markets install protectionist measures.

Tony Crabb, head of research for Savills Australia, said the current round of investment from China is simply an initial foray enabling buyers to “[learn] the rules of engagement.”

“The developers are a kind of vanguard of overseas investment,” Crabb said. “They come here and build 500 apartments and…it’s a bit of a walk in the park.”

Paul Craig, managing director of international investments at Savills, said the next wave of property investment from the greater China region will be led by institutional investors as opposed to developers and high-net worth individuals.

According to Craig, a second generation of capital comprised of Chinese and Taiwanese insurance groups have set their sight on high-end office and retail stock in Australia following Beijing’s recent decision to loosen policy governing offshore investments by institutions.

Craig, who has just returned from a trip to China, said Australian property is highly alluring to these wary institutional investors because of the country’s negligible level of sovereign risk as a developed economy.

Australia’s mature regulatory system provides high levels of transparency, sound information on prospective investments and a comparatively straightforward tax regime.

These appeals are further heightened right now by Australia’s low cost of borrowing and faltering exchange rates.

Crabb points out that the entry of institutional buyers could have a significant effect on the Australian market, given the vast sums of money at their disposal.

“Even relatively small investments from funds of this scale could have quite an impact on the market,” said Crabb. “There’s an awful lot still to come, for quite some time.”

Purchases by cash-flush members of China’s nouveau riche could also continue to rise as regional markets closer to home erect barriers to investment.

Savills Hong Kong senior director Simon Smith said the higher stamp duties enacted by Hong Kong and Singapore to to slow the Chinese wave of investment could also divert capital to Australia.

“If these investors are pushed out of Hong Kong they are going to look overseas and they are looking in the UK and [Australia],” he said.

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