• One-third of Australian development site sales in 2017 to Chinese

    28 February 2018

    26 February 2018 (Hong Kong) – One-third of Australian residential development site in 2017 were purchased by Chinese investors and developers, equating to AUD2.02 billion of site sales, according to Knight Frank’s latest report, Chinese Developers in Australia – Market Insight 2018.

    The report found that residential development sites purchased by Chinese developers and investors in 2017 had an average site area of 21,785 square metres.

    Of all Australian development sites purchased by Chinese developers and investors, 29% were suited to low density (single dwellings or landed properties) – up from two per cent in 2013. Knight Frank’s Head of Residential Research, Australia Michelle Ciesielski said, “Chinese developers have continued to dominate foreign investment in residential development sites across Australia.

    Many are now well-established in the local market. “Almost one-third of total residential site sales were sold to Chinese developers and investors throughout 2017 – equivalent to AUD2.02 billion in transactions. This share of sales to Chinese buyers has tripled since 2013, but decreased from the 38% recorded in 2016.”

    “Sustained developer interest in the Australian market has come in spite of government efforts in both Australia and China to tighten credit conditions as they relate to residential investment and development. “In Australia, the Australian Prudential Regulatory Authority (APRA) has encouraged local financial institutions to impose stricter controls, while in China the government has attempted to moderate capital outflow with China’s Central Bank imposing new rules for companies which make yuan-denominated loans to overseas entities.

    “However, in mid-2017, this was relaxed somewhat – resulting in a boost to market confidence.” said Ms Ciesielski. According to the report, along the Eastern states of Australia during 2017, Victoria recorded the sale of 38.7% of residential sites to Chinese buyers – the highest share of all states. Ms Ciesielski said, “This follows sustained growth in population, strong residential capital gains and a relatively low total vacancy. Many developers consider that Melbourne offers better relative value when compared to Sydney. New South Wales and Queensland followed, with Chinese buyers comprising 35.6% and 7.4% of their state’s total volumes, respectively.” Knight Frank’s Head of Asian Markets, Australia Dominic Ong said, “We continue to see strong levels of Chinese investment into Australia. “As Chinese developers gain experience in higher-density projects across the major cities, there has been diversification in many of their portfolios to include medium and lower-density sites. “These lower-density projects have also become more popular with local developers – especially in NSW with the draft Medium Density Design Guide being released, identifying the ‘missing middle’ to encourage more low-rise, medium-density housing to be built.

    “This type of project also tends to have less hurdles with the imposed tighter lending restrictions, and overall, lowers the delivery risk to the developer,” said Mr Ong. Knight Frank’s Head of Research & Consultancy for Greater China, David Ji said, “Due to the tight stock availability in the commercial market, Chinese developers and capital are still interested in the Australia’s residential market, albeit impacted by the tighter capital control from China.” Ms Ciesielski said, “As a result of moving towards lower-density projects, residential development sites being purchased by Chinese buyers have increased in average size to accommodate this type of horizontal development. “Sydney and Melbourne continue to be favoured by Chinese investors and this is likely to be sustained for both approved and raw sites. It’s expected lengthier due diligence will be carried out for those now established in the local market, and for new developers coming into Australia, transactions will be reliant on the ability to transfer their funds,” concluded Ms Ciesielski.

     

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