FOREIGN
INVESTMENT IN
AUSTRALIAN
PROPERTY
MARKETS
WHAT’S SET
TO UNFOLD
IN THE YEAR
OF THE
DRAGON
FOREIGN INVESTMENT IN AUSTRALIAN
PROPERTY MARKETS
A
A
luxury waterfront home at Castle
Cove on Sydney’s Middle Harbour
sold for $6,066,000 last year. It
was certainly a strong sale price – and
something of a give-away that the buyer’s
origins were mainland China.
Asian buyers and investors are a key
influence within some sectors of the
Australian property market, defying the
strong Australian dollar and underpinning
demand for property.
Earlier this year Savills announced the
sale of the luxury penthouse at Lumiere
Residences Sydney for $8.1 million.
It went to a Thai buyer – another sale
highlighting that Asian buyers continue
to seek opportunities to acquire premium
An interesting detail in the trend is that
Chinese-Australian families are lead.
ing the way with purchases of dual-key
.
erational living – with, say, an elderly
relative or young university student living
independently in a one-bedroom space,
internally connected to the family’s larger
apartment.
The good educational opportunities,
its geographic proximity, the wealth of
attractive assets, political stability and a
.
ment all make Australian an attractive
destination for investment.
This eBook looks at recent times and
envisages what could unfold in the Year
.
.
SYDNEY A ‘WORLD CLASS’ CITY AND A
SAFE HAVEN FOR ASIAN INVESTORS
Q. I am a foreign person. Can I invest in property
in Australia?
Yes, depending on what you wish to invest in.
Acquisitions of residential real estate require prior
foreign investment approval before the purchase can
proceed, though there are certain exemptions.
Certain acquisitions of commercial real estate also
require prior foreign investment approval.
All Q&As sourced from the Foreign Investment Review Board
T
T
he inclusion of Sydney in Savills’
.
lights the city’s emerging standing
.
erty, offering a safe haven for international
investors, particularly from Asia.
The 2011 Savills report on the world’s
10 leading prestige property locations for
international investors suggests Sydney is
positioned to benefit from the both the “old”
and “new” world economies it bridges.
Savills NSW research director Simon
Hemphill believes Sydney is seen as a
stable old-world investment choice with
a well-established luxury housing market,
.
ing new-world economies of Asia Pacific.
Luxury Sydney property also repre.
sents very good value on the global stage,
according to Savills, which ranks Sydney
.
aires, while also offering the largest size
of homes for the super-wealthy, at almost
1,900 square metres.
“Overall, Sydney still offers international
investors great value and is extremely
well-located to take advantage of Asian
wealth if and when its policies restricting
international buying are relaxed,” Hemp.
hill says.
“Sydney is geographically very well
placed to benefit from investment from
frustrated Chinese and other Far Eastern
investors, but they will need to open up
their markets to such investors to trigger
this,” according to Savills research.
“The city’s undersupply of accommoda.
tion and high in-migration plus restrictions
on new development, due to zoning and
geography, are likely to keep prices the
highest of any Australian city.”
Savills describes Sydney as beginning
.
istics of the World Class city – constrained
land supply, increasing pressure from
overseas investors and high demand for
prime accommodation – but it is unusual
in offering very spacious livingaccom-
modation in relation to other leading
international investment locations.
“Asian interest in residential develop.
ments within the Sydney metropolitan
area is at an all-time high, with both Asian
developers and private investors making
substantial investments in the market,”
Hemphill says.
“Anecdotally, almost a third of residen.
tial projects in the Sydney metropolitan
area currently under construction or being
actively marketed are owned by Asian
development companies.
“Private investors from Asia also make
up a significant portion of buyers for inner-
city residential developments, such as the
Frasers Property Central Park develop.
ment in Broadway, in the Sydney market.
Indeed, circa 25% of purchases made so
far in the Central Park development were
by south-east Asian private investors. This
trend is set to continue, given the nature
and location of a number of developments
currently mooted in and around Sydney.”
CROWN GROUP SEEKS OUT ASIAN
BUYERS FOR TOP RYDE PROJECT
Crown International Holdings
Group enters the Year of the
Dragon with ongoing projects
that will generate apartments with an end
value of more than $2 billion.
Crown has also announced plans to set
up a display pavilion in the heart of Syd.
ney’s Chinatown later this year to better
meet the needs of the Chinese community
and visitors to Sydney.
Crown International Holdings chief
Iwan Sunito says prospective buyers or
investors will be invited to relax in very
comfortable surrounds while they have
the opportunity to converse with one of
Crown’s international and multi-lingual
sales consultants, who are fluent in a vari.
ety of languages including Indonesian,
Korean, Mandarin and Cantonese.
“The vibrant and dynamic display pavil.
ion will provide locals and international
visitors with detailed information about the
various Crown projects, as well as being
able to experience a display apartment,”
Sunito says.
“Crown understands it’s important to
provide all of our clients with detailed
information for each of our developments,
and we believe it’s important to provide
this service in a person’s first language
wherever possible.”
Crown Group’s signature Asian-inspired
designs, which create private sanctuaries
for residents to call home, continue to
attract buyers from all around the world.
“Our properties are designed to incor.
porate principles of feng shui and the
architectural features display a fusion of
Asian influences.
“At Top Ryde City Living for example,
residents can get some quiet time at the
meditation platform, sit and read a book in
the beautifully landscaped gardens, swim
a few laps of the pool or head to the gym
for some exercise or yoga,” says Sunito.
Crown Group’s $500 million Top Ryde
.
est residential property developments, is
currently being pre-sold, and Crown has
launched marketing initiatives in Jakarta,
Indonesia in 2011, with further roll-outs in
Shanghai, China and Singapore planned
for 2012.
Top Ryde City Living has been pre-
approved by the Australian Government’s
Foreign Investment Review Board to
.
ers, so foreign investors are assured there
.
tainty in being allowed to purchase.
Crown offers foreign investors a 5%
rental guarantee for one year.
“We have had a great response to the
first release of Top Ryde Living City with
approximately 90% already sold and only
26 apartments remaining for sale in stages
1 and 2, which range from $500,000 for a
one-bedroom plus study with car space to
$875,000 for a three-bedroom plus study
and two car spaces,” Sunito says.
The next launch will be in March with
the release of 135 apartments, says Kym
Rogers, head of sales and marketing.
FOREIGN DEVELOPERS GRAB 30% SHARE
OF AUSTRALIAN APARTMENT MARKET:
CBRE’S KEVIN STANLEY
I
I
n a major trend that mirrors current
investment into the commercial real
estate market, foreign-based companies
have moved firmly into the business of
developing residential apartments across
Australia. More than 13,000 apartments
are presently either planned, being
marketed or are under construction by
foreign companies in 37 separate projects.
Based on average apartment completions
in Australia each year, this represents a
market share as high as 32%.
SINGAPOREAN AND HONG KONG
DEVELOPERS LEAD THE PACK
Asian developers account for 92% of all
apartments presently being proposed or
.
tralia. The balance is split almost evenly
between the USA, Canada and an as-yet-
unknown country source. See Chart 1 for
details. Developers from Singapore are
proposing or building more apartments in
Australia than devel.
opers from any other
.
sent, by a big margin.
.
opers are responsible for almost 5,000
apartments presently
planned or underway,
with 58% of these
being facilitated by
the globally active
developer Frasers
Property, and 65% of
these in the Central
Park project in Syd.
ney.
Q. How many
properties can I
purchase?
There are no
restrictions on the
number of properties
you are permitted
to purchase, unless
you are a temporary
resident and want
to acquire more
than one established
(second-hand)
dwelling as your
principal place of
residence.
The next most significant source of
development capital is Hong Kong, with
a single developer (Far East Consortium)
behind 2,700 apartments in two Mel.
bourne projects.
WHAT’S SETTO UNFOLD IN THE YEAR OF THE DRAGON
FOREIGN DEVELOPERS GRAB 30% SHARE
OF AUSTRALIAN APARTMENT MARKET:
KEVIN STANLEY (CONTINUED)
DEVELOPMENT IS WIDESPREAD
Apartments are being proposed or built
by foreign developers in a widerange of
locations across Australia and not just in
the bigger capital cities.
Chart 2 shows the num.
ber of apartments by
location.
The distribution tends
to follow the size of the
.
kets with the highest
demand for apartments
are Sydney and Mel.
bourne, accounting for
79% of the total. Beyond
this, though, foreign
developers are facili.
tating apartments in a
wide range of locations,
including the Gold Coast (10% of total),
Brisbane (6%), Perth (3%) and Adelaide
(2%).
In a surprising result, Melbourne has a
greater number of apartments proposed
by foreign developers than Sydney,
despite being a city with 450,000 fewer
people.
Location by submarket varies widely,
.
riencing the highest concentration of CBD
projects of any of the major cities. In Mel.
bourne’s case, we think this has been
driven by the relatively high availability
of large sites, especially in the northern
blocks of the CBD.
Sydney has a much more balanced dis.
tribution of apartments between the CBD,
city finge and suburban submarkets. This
is a function of the tightness of site availa.
bility and the expense of land in the CBD.
In Brisbane, the city fringe has been much
more popular with foreign apartment
developers than the CBD, although there
is a much smaller relative penetration by
.
bane market to date, with a greater focus
on nearby Gold Coast instead.
WHAT’S SETTO UNFOLD IN THE YEAR OF THE DRAGON
FOREIGN DEVELOPERS GRAB 30% SHARE
OF AUSTRALIAN APARTMENT MARKET:
KEVIN STANLEY (CONTINUED)
IN THE PIPELINE
The trend of foreign companiesactively
.
tralia appears to have a long way to run.
Only 40% of the apartments being facili.
tated by offshore developers are under
.
ments are in the development pipeline.
.
ticularly in the bigger markets of Sydney,
Melbourne and the Gold Coast are staged,
which will allow for adjustment to market
delivery according to demand and this will
limit development risk. Off-the-plan pur.
chasing is common and will also allow for
individual stages or projects to proceed in
line with demand.
Recent project launches suggest
demand from end purchasers for well
located and quality product remains high,
with reports of almost whole project stages
.
ing to future stages being brought forward.
WHYTHIS TREND, WHATARE THE
IMPACTS AND WILL IT CONTINUE?
There appears to be a confluence of
reasons why this trend has emerged
so strongly in the past few years, some
of which are similar to the motiva.
tions behind the current high level of
commercial property investment from
offshore. Some of these reasons are:
1. Diversifying risk and providing for
business growth in new markets. Many
of the foreign companies developing
residential apartments in Australia are
well-established businesses in their home
countries. Rather than potentially over
exposing their business to the economic/
consumer cycles of just their home coun.
tries, these companies are spreading
.
ferent cycles.
2. Australia is considered a market with
.
opers see Australia as a growth-style
.
tor demand for the end apartment product.
Foreign developers believe, while there
.
bly the underlying growth of the Australian
economy and the population will provide
opportunities to sell finished product.
3. Shifting equity to a safe country. By
shifting equity into Australia to develop
residential apartments, some developers
are seeking to find a “safe haven” for this
capital.
4. Dwelling starts are at a low point in
.
gage rates and residential prices have
suppressed overall buyer activity and
caused dwelling starts, for both houses
and apartments, to drop to a cyclical low.
This means in most markets, there is less
competition for those developers who can
facilitate projects, while strong underlying
user demand remains in most locations.
5. Development site costs are relatively
low in the pricing cycle. There have been
a large number of development sites on
the market over the last few years in the
wake of the global financial crisis. This
has led to a drop in prices of anywhere
WHAT’S SETTO UNFOLD IN THE YEAR OF THE DRAGON
FOREIGN DEVELOPERS GRAB 30% SHARE
OF AUSTRALIAN APARTMENT MARKET:
KEVIN STANLEY (CONTINUED)
Q. I am in a same-sex relationship with an
Australian citizen. Am I exempt if we purchase
residential property together as joint tenants?
Yes, the spouse exemption applies to you if you
‘have a relationship as a couple living together on
a genuine domestic basis’ (as defined in the Acts
Interpretation Act 1901).
between 5% and 50%, but more typi.
cally in the 20% to 30% range. Foreign
developers have taken advantage of this
.
ity by purchasing at a lower rate.
6. A relative ease of doing property
.
ments to be made, foreign investors and
developers tell us Australia is a relatively
easy place to do property business. It is
highly transparent, heavily informed and
enjoys high security of real estate tenure.
The impacts of foreign involvement in
the apartment market are many and are
mostly positive. Critically, it’s providing
a stimulus to the
construction sec-
tor at a time when
developmentactivity is generally
at a low level.
.
viding new ideas,
standards and
designs to broaden
the product range
in Australia and
introduce fresh
competition in
these areas.
Some concerns have been expressed
about the potential for exacerbating the
apartment oversupply situation in the Gold
Coast, with 1,350 units proposed there by
foreign developers. However, we think that
given the lead time for the approval and
development of such large-scale projects
and provided they are carefully pitched
to meet demand, this product should be
readily absorbed into the local market.
Despite some concern for oversupply
.
oped by foreign companies appear to have
been well received into the local market,
with a high level of sales off the plan and
projects proceeding to completion. We
see the risk of apartments developed by
foreign-based companies as no different
to those of domestic companies.
The drivers of this significant trend
appear likely to continue. With strong
growth in equity capital, especially in Asia,
looking to geographically diversify and
reasonable levels of demand for the end
product driving solid development returns
.
ditions, we expect this trend to continue
into the future.
EXECUTIVE DIRECTOR FOR GLOBALRESEARCH, CBRE
WHAT’S SETTO UNFOLD IN THE YEAR OF THE DRAGON
MORE PAIN FOR REGIONAL HOTELS AS
CHINESE TOURISTS PREFER CITY OVER
COUNTRY: RBA
R
R
egional hotel operators must find
ways of enticing Chinese visitors
to coast and country resorts or risk
another decade of struggle, according to
the RBA’s December 2011 quarter bulle.
tin. The RBA forecasts growth in Chinese
visitors alone is expected to contribute
about one-third of the growth in Australia’s
tourism export earnings until 2020.
Between 2001 and 2011, Chinese visitor
numbers have grown by 13.4% annually,
contributing 16.4% to annual revenue,
while Indian arrivals have increased by
12.3% annually, contributing 7.7% to
tourism revenue. In comparison, visitors
numbers from the US and UK have not
grown over the last decade.
According to the Tourism Forecast.
ing Committee, the share of spending
by international visitors in total tourism
.
tinue to rise over the next decade, drivenprincipally by strong arrivals from Asia.
“This poses a challenge for the tour.
Q. Do I need
approval to inherit
property someone left
me in their will?
No, you are
not required to
apply for foreign
investment approval.
Any acquisition of
residential property by
way of an inheritance
(settlement of a legal
will) or by a court
ruling is exempt from
the requirement
to seek foreign
investment approval.
ism industry in leisure and regional areas,
which have at least to date had limited
exposure to the growing segments of the
inbound tourism market compared with
Australia’s capital cities,” says the RBA.
According to the central bank, overseas
visitors prefer to stay in capital cities (and
capital city hotels) due “the importance of
.
ways to Australia”.
“Capital cities have benefited from a ris.
ing share of overseas visitor expenditure
as spending by international visitors in
regional areas has declined somewhat in
recent years in real terms.”
“This trend is consistent with the strong
.
onstrate a strong propensity for travel to
capital cities – and the decline in Japanese
tourists that has had a more pronounced
effect on overall tourism demand in some
regional destinations.
WHAT’S SETTO UNFOLD IN THE YEAR OF THE DRAGON
MORE PAIN FOR REGIONAL HOTELS AS
CHINESE TOURISTS PREFER CITY OVER
COUNTRY: RBA (CONTINUED)
“For instance, in 2010-11, Sydney and
.
tions for Chinese visitors (as measured by
visitor nights), whereas Japanese visitors
have demonstrated a relatively stronger
preference for travel to Queensland’s
beach destinations, notably the Gold
Coast and tropical north Queensland,”
says the RBA.
According to the August Midwood
Report, Queensland regional and leisure
areas heavily dependent on overseas
tourists suffered big drops in revenue
when comparing the March quarter of
2011 with the March quarter of 2010.
Accommodation takings for Whitsunday
Island resorts were down 16% compared
with the same time last year, while takings
.
cent mainland areas (including the likes of
Port Douglas) were down 21% over this
time frame.
BURRAGA ISLAND ON THE NSW SOUTH
COAST SELLS TO CHINESE INTERESTS
Burraga Island, a 121-hectare
Shoalhaven River island, sold for
$2.5 million to Chinese interests in
late June 2011.
It is one of a handful of privately owned
NSW coastal islands, hardly paradise, but
its sale price ranks it among the many
tropical island counterparts.
It was sold recently, ending 34 years of
Kennedy family ownership of the island.
It is about six kilometres up from the
coastal Comerang Island, not far from the
Princes Highway, Nowra Bridge. It is set
.
erry and the southern village of Terara.
The purchasing entity gives its director
as the Shanghai-born property developer
Quan (David) Fang and its beneficial own.
ers as Beauty Castle Enterprises, a British
Virgin Islands-based company.
Although there appear to be no formal
links, Fang is also a director of ASF Group,
the publicly listed company that operates
in Australia and through subsidiaries and
investments in controlled entities across
China, with a focus on mineral resources
and energy, property marketing and travel
services.
WHAT’S SETTO UNFOLD IN THE YEAR OF THE DRAGON
CHINA’S PROPERTY SLUMP BAD NEWS FOR
RESOURCES BOOM: ANZ
D
D
emand for Australian commodities
could take a hit if the cooling
Chinese property market
continues to slump.
According to ANZ’s China economists
Li-Gang Liu and Zhou Hao, Chinese
authorities have “been actively cooling
an overheating property market for the
last two years”, with both Chongqing and
Shanghai “experimented with a property
tax”.
In addition, more than 20 first- and
second-tier cities (the major capital cities
and secondary provincial capitals) have
imposed a “non-resident purchase restric.
tion policy”, while an ambitious public
.
lion affordable houses in 2011-2012 and
36.5.
stantially reduce demand in the private
housing market in the foreseeable future.
Q. I do not hold
a temporary
residency visa but
I wish to purchase
residential property
Do I need to seek
approval?
Yes. Applications
by foreign persons to
acquire residential
real estate will be
approved if they
meet the eligibility
criteria. If you are not
eligible for approval
under the policy, then
the acquisition is
generally considered
to be contrary to the
national interest and
will not normally be
approved.
“These policies have hit the property
sector hard: transaction volumes have
declined significantly, first in the top-tier
cities, and then the second- and third-tier
cities. New property transaction volumes
declined by more than 30% in the first 10
months of 2011, compared with the same
period in 2010,” the bank says.
“In October, the economy witnessed the
.
tion of the 70 city indices in January 2011:
new residential property prices in 33 cities
have declined on a monthly basis, while
prices in another 23 have remained flat,”
Li-Gang Liu and Zhou Hao report.
WHAT’S SETTO UNFOLD IN THE YEAR OF THE DRAGON
CHINA’S PROPERTY SLUMP BAD NEWS FOR
RESOURCES BOOM: ANZ (CONTINUED)
They warn that because the property
sector is a “central pillar for the Chinese
economy” the impact of a slump on the
economy would be compounded by the
lack of an alternative growth engine and
.
able future.
“There is a close link between property
sales and fixed asset investment, with a
weak property market leading to slower
property investment,” they say.
“Aslump in the property sector will have
significant repercussions for related indus.
trial sectors… Key linkages include the
upstream industries of steel, cement and
building materials; downstream industries
of automobile and home appliance; and
the intermediate sectors of banking and
advertising,” say Li-Gang Liu and Zhou
Hao.
Q. I am a foreign national and was recently told that I would not need approval
if I
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