Chinese Buyers' Penchant for Australia's Apartments Boosts Economy
According to research published by real estate company CBRE, Chinese investors have led the surge in foreign investment in residential developments, acting as a prop for Australia's ailing economy.
In the year to April 2015, foreign capital backed 54 of the 115 inner-city development sites sold in Sydney, Melbourne and Brisbane, with Chinese developers claiming 36 of those deals.
CBRE estimates that Chinese investment in Australian real estate reached ?5.3bn in the first six months of this year, which was 25% of all offshore Chinese property purchases. Australia's share of Chinese capital flowing into global real estate markets has risen from 10% in the past two years.
Chinese-backed Aqualand are major players in Australia's real estate sector, acquiring almost ?1bn of development sites across Sydney and Perth, with the largest being its ?160m purchase of three waterfront buildings, including the Seven Group's headquarters in Sydney's inner-city, Pyrmont.
Aqualand's general manager Wayne Xiong said it was one of the seven projects being developed and that it combined preservation of heritage buildings on the waterfront with the opportunity for freehold purchase, offering "something highly sought after by local buyers as well as meeting the expectations of the international market".
Another large scale Chinese investor is Ping An Insurance, China's second-largest insurer which is expected to commit hundreds of millions to Australia's housing market over the next few years. The private held company, which controls the separately listed Ping An Bank is close to signing a deal with one of Australia's biggest developers, Mirvac Group, to part-fund a luxury apartment complex in Sydney.
Enterprises owned by the Chinese state are also active in Australia. Greenland Holding Group, China's largest state-owned real estate group, has a development portfolio in Australia worth almost ?1bn.
Its largest project is Greenland Centre in Sydney's central business district (CBD). It will be Sydney's tallest residential tower, including 470 apartments and six penthouses over 66 levels, nearly all pre-sold. Local partner Brookfield Multiplex estimates construction will generate around 5,500 jobs, boosting the local economy significantly.
Justin Brown, executive director of residential projects for CBRE said: "The scale they're used to deal with is so much larger than local developers. They have an additional perspective where they're used to delivering 10,000 to 15,000 apartments a year".
According to Australia's Foreign Investment Review Board , Victoria is getting most of the offshore property funding, with foreign purchasers restricted to buying new properties accounting for just over 18% of all residential sales in the state, compared with 10% in New South Wales.
Senior property analyst at ANZ bank, David Cannington said the growth in apartment construction was being driven by high-rise developments, currently running at an annual pace of 80,000 units, up from 33,000 in 2012-2013. He added that nearly all projects were pre-sold ahead of completion, with little evidence of purely speculative property development by foreign investors.
The significant Chinese interest in Australian real estate has instigated an apartment building boom that has been responsible for a fifth of the nation's economic growth over the past two years, assisting the county's recovery following the end of the mining construction boom.
The number of new apartment projects winning approval from local councils has almost doubled since 2013 to 105,000 new residential units over the past financial year, with apartments accounting for 95% of the growth in housing construction in that period.
The latest June quarter national accounts showed housing construction was ?3.8bn or 24% higher than in the same quarter two years ago. Australia's nominal economy overall has risen ?17.8bn, representing growth of 5.5% over that time.