In 2017 Sydney was the real winner when it came to top property investments from China, with seven of the top ten sales in Australia.
While Chinese investment in Australia overall fell by 11 per cent to 10.3 billion (USD) in 2017, real estate investment from China in Australia is still relatively steady according to the KPMG/ University of Sydney Demystifying China report. It is second only to mining as the industry of investment choice for Chinese investors. In total $4.4 billion was invested in 2017 in real estate. Of that $1.8 billion was in commercial property. According to the report, despite the impressive numbers, there has been a 22 per cent fall in Chinese investment in property in Australia since 2016.
The top property investments in 2017 according to the Demystifying China report are:
- Black Forest Road, Wyndham Vale, VIC: Country Garden, Residential, $400m
- Bakehouse Quarter, NSW: Yuhu, Mixed-use, $380m
- 86-88 Christie Street, St Leonards, NSW: JQZ, Office, $295m
- 15 Carter Street, Lidcombe, NSW: Australia YMCI Pty Ltd, Industrial, $290m
- Fuji Xerox, 101-107 Waterloo Road, NSW: JQZ Eleven, Office, $180m
- 45-61 Waterloo Rd, Macquarie Park, NSW: John Holland/CCCC, Residential, $170m
- Fujitsu House, 15 Blue Street, North Sydney, NSW: Aqualand, Office, $169m
- InterContinental Sydney Double Bay, NSW: Shanghai United, Hotel, $139m
- 960 Donnybrook Rd, VIC: Blueways Group (50pc stake), Residential, $100m
Property Still Looks Positive
The head of the JLL Australia's China Desk, Michael Zhang, , who was one of the authors of the report, said while overall Chinese investment is down across the board, it's still looking positive when it comes to property. “Australian real estate remains a key destination for Chinese capital. The macroeconomic framework is supportive, while the market is attractive from a global perspective – economic fundamentals are robust, population growth is solid, market transparency is high, and returns are broadly higher relative to comparable markets globally.
Mr Zhang expanded on the report’s observations, “There has been a notable shift in the scale and type of investment into Australian real estate. Investors and developers are becoming more selective in acquisitions, with mandates increasingly geared towards higher quality investment assets and well located sites with less planning risk.’’
While the property investment market is still strong, there are still some barriers which are holding it back, according to some experts. The foreign buyers surcharge in Victoria includes commercial properties as well as residential. The surcharge adds about 7 per cent to the foreign commercial property purchase. While there are similar laws in New South Wales and Queensland for residential they exclude commercial real estate. According to leading Chinese property watchers, these surcharges are causing some Chinese investors to be nervous.
Commercial Property Second Top Industry
Overall, the top 10 industries when it comes to Chinese investment in Australia according to the Demystifying China report are:
Value: AUD million
||Commercial Real Estate
||Food & Agribusiness
||Energy (oil & gas)
Co-author of the report Doug Ferguson, who is Head of Asia & International Markets for KMPG Australia, told Business Insider there were a few reasons for the 11 per cent drop in investment across the board.
“2017 was an important and testing year in many ways for Chinese direct investment in Australia. Chinese government regulations which were implemented to address concerns about speculative, irrational global investments and massive capital outflows have impacted the Australia result. Recent changes to Australia’s foreign investment regulations for strategic infrastructure assets have also had an impact.” he told Business Insider.
Australia Attractive for Chinese Investment
“Australia remains globally competitive for attracting Chinese investment, retaining its position as the second largest recipient of accumulated Chinese investment - only behind the US - with just under $US100 billion since 2008.
“However the gap was growing in 2017. Chinese executives tell us that Australia remains a relatively safer and more attractive country to invest than many others but only 35% of survey respondents feel welcome to invest here, which is down from 52% in 2014.”
Other key observations in the Demystifying China report include:
- Australia is coping pretty well compared to the United States and the EU, who had a 35 per cent and 17 per cent drop in Chinese investment respectively from 2016 to 2017.
- Overall, the Chinese global investment fell 29 per cent in 2017, off historic 2016 levels due to tightened Chinese capital outflow and deal approval regulations.
- Australia remains the second largest recipient of Chinese investment, No.1 is the United States.
- Healthcare is a growing market for Chinese investment in Australia, it surged to AUD $1.6 billion in 2017.
Source: Demystifying China report.
China’s attitude towards Australia has continued to cool in recent times. Australian government cabinet ministers have had difficulty communicating with their Chinese counterparts. While US investment from China is undergoing its own Trump induced strained relationship. What impact this will have on future Chinese investment in Australia remains to be seen. It is also possible China’s focus on its One Belt, One Road initiative may further reduce Chinese investment in Australia, despite Australia’s commercial property attractiveness.