(Pictured: David Chin)
by Andrew Polley*
Chinese capital for property development is being driven offshore, to the rest of Asia and Australia, because of declining returns and a continued trend to invest internationally, a conference for ‘Australia-China Property Developers and Investors’ was told last week.
But David Chin, of consulting and research firm Basis Point, which produced the conference, said only 5 per cent of investments by high-net-worth (HNW) Chinese investors was currently domiciled outside of the mainland, compared with 24 per cent of HNW money globally. “So, we could see an increase in offshore investments by 18 per cent,” he said.
Chin believes that the recently announced Free Trade Agreement between China and Australia is “the best wealth creator since the gold rush”. “Australia is one of the top three or four destinations for Chinese investment, he said. “And 64 per cent of Chinese HNWs want real estate.”
About 300 investors and property people attended the conference in Sydney on December 8, with most speakers bullish on the prospects for the sector and Chinese involvement in it.
Veteran developer Sid Londish, 90, for instance, concurred that the FTA was “the best thing Australia has ever had”. He thought, however, that there had already been too much residential property development in Australia and that a “bubble” was coming in 18-24 months. A better bet for developers was retirement dwellings, he said.
Londish, who was born in China, said that Chinese investors were “naturally calculating and risk takers”, compared with Australian investors and the banks. Australia needed to change to stay competitive with the Chinese.
Chin said that Chinese investors were looking to invest in cities which had high numbers of Asian migrants, such as Sydney. He said there were about three million Australian residents who were originally from north and east Asia, as well as 790,000 visitors and 200,000 students each year.
Berrick Wilson, the managing partner of KordaMentha Real Estate, divided Chinese property investors into four groups: migrants who were looking for visas and were prepared to accept lower returns; HNWs who are driven mainly by returns; developers, who are overweight China and are seeking new opportunities; and institutional investors. He said the developers could make more money in China than Australia but with much more risk.
According to Suren Pather, the chair of SUMO SIV managed fund which assists Chinese investors to get Australian visas, the Chinese were looking for joint ventures here to take advantage of on-the-ground experience in Australia. He noted that some Chinese were pooling their money to get an Australian SIV, “to get someone here permanently”.
Overall, the mood for Chinese investment in Australia was very positive and Australians should embrace this inflow of capital and investment into the Australian economy.
*Andrew Polley is executive, commercial investment, at La Trobe Financial.