Oz, NZ real estate draws Asian investors
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Go to any property auction in Sydney or Melbourne on a Saturday morning and you will probably find that the vast majority of those attending are Asian or acting for Asian buyers in Singapore, Hong Kong or the Chinese mainland.
For many Asians with disposable income Australia is becoming an attractive place to invest in property.
“The last couple of years have seen a sharp rise in Asians investing in property in Australia,” David Rees, head of research with global real estate services firm Jones Lang LaSalle, tells China Daily Asia Weekly.
Rees says a number of factors are driving Asian investment in the Australian property market: “Many see Australia as a nice place to live in. They see it as being politically stable and safe to raise a family or to retire.”
A real estate agent who works in Sydney’s inner west — which takes in the University of Sydney and New South Wales, the University of Technology Sydney, and the Notre Dame campus — says with over 400,000 foreign students studying in Australia each year, many parents, especially Chinese and Indian, buy apartments for their children.
“Not so much as an investment but to ensure that their children are safe,” says the agent who does not want to be identified.
Another realtor Colliers International said in a recent report that wealthy Chinese are buying real estate in cities like Sydney, Melbourne, London and Vancouver as “second homes”.
According to Foreign Investment Review Board data, the government approved 3,897 real estate purchases by foreign investors in the 2009-10 financial year worth A$20 billion ($21 billion). Data for 2010-2011 is yet to be released.
Until 2010, all temporary residents in Australia could buy residential property without going through the board. But now all property bought by non-residents has to be approved by it.
Even so, the government’s move has done little to slow demand from foreign investors, especially those north of Australia.
According to Morry Schwartz, head of Melbourne-based property developer Pan Urban, Asian investors are vital to property development in Australia.
In an interview with Property Observer, a property investment website, he says Chinese buyers from countries like Malaysia and Indonesia see a country like Australia as a safe haven for the long term.
“Sometimes Chinese people who are living in Malaysia or Indonesia feel slightly insecure about buying where they live because there may be anti-Chinese sentiment in those countries,” he says.
Not only are individual buyers taking an interest in the Australian residential property market but Asian developers are also starting to see solid returns from projects, mainly in Sydney and Melbourne.
A recent report by the global commercial real estate firm CBRE said development activity in Australia involving foreign companies has reached levels not seen in more than two decades.
The report focuses on the residential development sector, which has been heavily targeted by offshore groups — a trend which mirrors the current offshore push into commercial property investment in Australia. The report said foreign companies currently have over 13,000 apartments either planned or in the marketing/construction phase in 37 separate projects in Australia.
Based on average apartment completions in Australia in 2011, this represents a market share of around 32 percent.
In the report, CBRE executive director, global research and consulting, Kevin Stanley, said foreign developers had not been this active in Australia since the building boom of the late 1980s and early 1990s, when mostly Japanese companies were active in developing offices, shopping centers and hotels.
“The focus this time round is on residential development and, by any measure, activity is at a significant level,” Stanley said.
“Asian developers, predominantly from Singapore, are leading the pack, accounting for 92 percent of all apartments presently being proposed or developed by foreign companies in Australia,” he said.
Singaporean developers are responsible for almost 5,000 apartments presently planned or underway, with 58 percent of these being facilitated by global developer Frasers Property and 65 percent of these being in the Central Park project in Sydney.
The next most significant source of development capital is Hong Kong, with a single developer — Far East Consortium — behind 2,700 apartments in two Melbourne projects.
Malaysia with around 12 percent followed by mainland China and South Korea with 9 percent each and India 6 percent make up the balance of what is a broad spread of Asian companies presently developing apartment projects in Australia.
“This follows closely the present flows of Asian capital into the Australian commercial property sector. Year to date, Asian buyers have been responsible for 51 percent of all foreign investment into commercial property and 19 percent of all transaction activity in this country,” Stanley said.
Apartments are being proposed or built by foreign developers in a wide range of locations across Australia and not just in the bigger cities.
Stanley said the distribution tended to follow the size of the cities. The biggest markets with the highest demand for apartments are Sydney and Melbourne.
Beyond this, foreign developers are also behind projects in a wide range of locations, including the Gold Coast, Brisbane, Perth and Adelaide.
Stanley said Asian investors were also buying residential property in regional Australia close to mining centers, such as Mackay in Queensland, where population and employment growth is very high.
Across the Tasman in New Zealand the story is much the same with Asian buyers capitalizing on what many see as the country’s easy lifestyle and fresh air.
Mike Bayley, managing director of New Zealand’s real estate agency Bayleys, says there has been a “groundswell” of interest in New Zealand property out of Southeast Asia and China.
Bayley says offshore Asian investors have clearly been watching the New Zealand property market and there has been a noticeable step-up in activity recently.
“The Asians are classic counter-cyclical investors and now that there is strong evidence that New Zealand’s property markets have turned the corner, we are starting to see some serious investment action out of Asia,” he said in an interview recently.
“Currently, we have close to NZ$300 million ($246.6 million) worth of property under contract or under negotiation with offshore Asian buyers, the largest of which is subject to OIO (Overseas Investment Office) approval.
“As a result of this, we have decided to make Asia the main focus of our offshore marketing thrust for the remainder of the year, and will be actively presenting properties on behalf of New Zealand vendors to investors in the region.”
James Chan, who heads Bayleys’ multilingual international sales team, says concerns that their own property markets may be starting to overheat again have prompted an increasing number of Asian investors to diversify their property holdings into other parts of the world – such as Australia and New Zealand.
Asian property markets rebounded much more quickly from the global financial crisis than most other parts of the world.
In an effort to dampen an overheated property market in China, the Chinese government has introduced borrowing and buying restrictions, including a tax on the purchase of investment properties (other than the first home) in fast growing cities such as Shanghai and Chongqing. Chan says this has led to some investors looking for opportunities in New Zealand instead.
“While these may be only temporary restrictions in China, New Zealand’s appeal as an attractive long-term investment destination is continuing to grow,” Chan says. “Chinese investors are becoming more aware of New Zealand as our business relationship with China strengthens on the back of a free trade agreement between the two countries.”
Chan says Chinese investment in major sectors of New Zealand’s economy — such as agriculture and energy — also gives property investors comfort that “New Zealand is a good place to invest”.
“New Zealand is seen as a safe haven, both from an investment and lifestyle point of view, in an increasingly turbulent world,” he says.
