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Chinese residential developers have emerged as a major force in the Australian market; Chinese billionaire's big plans for Sydney
Topic Started: 13 Feb 2013, 09:50 AM (2,020 Views)
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Eight reasons Chinese residential developers have emerged as a major force in the Australian market: Kevin Stanley

By Kevin Stanley
Wednesday, 13 February 2013

The 21st century may be the “Asian century”, but Australia has enjoyed links with the region for over 150 years. The Australian gold rush, which began in 1852 and petered out in the late 1880s, was built on a massive wave of migration from all parts of the world.

The largest foreign contingent on the goldfields was the 40,000 Chinese. In 1861, Chinese immigrants made up 3.3% of the Australian population, the greatest share it has ever been. The 2011 Australian census recorded Chinese-born people at 1.5% of the population.

Most of the Chinese in Australia working on the goldfields were under contract to Chinese and foreign businessmen. In exchange for their passage money, they worked on the goldfields until their debt was paid off, and most returned to China. About 10% stayed, and their hard work continued, putting down roots to create the Chinatown precincts in central Melbourne and Sydney. These areas continue as the vibrant epicentres of Chinese history, culture and business in Australia.

While the recent high level of Asian investment into the Australian apartment market attracts much publicity, much less is known about the impact offshore developers are having on the Australian residential market.

Many are surprised to know offshore developers are now proposing or building 20,000 apartments across Australia, with Chinese developers second only to Singaporeans in the ranking of offshore sources. This provides offshore developers with close to a 50% market share in this Australian property development sector.

But there is a link between the number of offshore developers and the high level of foreign purchases. Many Asian developers are marketing off-the-plan sales directly back into their home countries and cities through well-known and tried marketing avenues.

This high visibility through marketing and the familiarity offshore purchasers have with the product appears to be a winning formula and has helped push off-the-plan sales to a level that is ultimately supporting such a high foreign developer involvement in Australia. This is certainly the case for Chinese developers.

As at December 2012, Chinese developers have about 4,500 apartments in the development pipeline in Australia. This is a tiny number by Chinese standards, where some of the larger developers will complete about 100,000 apartments in a single year, and there are a number of developers doing that when market conditions allow.

In Australia, Chinese developers have invested at least $A350 million in sites nationally and are proposing projects so far of at least $1.6 billion. This activity is providing an important stimulus to a local property and building industry, which is at a very low point in the economic and financial cycle.

But Chinese developers are still very much in the emerging phase in Australia, behind the Singaporeans, who have been the pioneers of offshore developers here and successful ones at that. Singapore-based Frasers Property stands out as the single largest offshore developer to date, with large and high-profile projects such as Central Park in Sydney and the Frasers Landing/Queens Riverside projects in Perth making a bold mark on the local scene.

Of the 4,500 apartments in the Chinese developer pipeline, 72% are still classified in the broad “planning” phase, which could mean sites have only recently been purchased with plans still being developed (and often final apartment numbers still unknown), with others still going through the development approval process. Singaporean developers have just 39% of proposed stock in the “planning” phase and 44% (2,600 apartments) under construction.

Of the Chinese pipeline, 700 apartments are presently under construction and around 550 recently approved.

The Chinese component of the offshore developer trend in Australia comprises 17 projects of the 58 presently monitored in total. Interestingly, of these Chinese-backed projects, 74% by apartment numbers are in Melbourne, with the percentage of foreign-developed apartments in Melbourne at a still-strong 48%.

Access to sites, a lower general site cost per square metre, a more accessible planning system and the strong cultural/education connections appear to have driven this higher-than-average representation of Chinese-developed apartments in Melbourne. Strong growth in visitor arrivals from China to Melbourne though increased direct flights appears as evidence of the strengthening links.

The Gu family’s AXF Group is the most active of the Chinese developers in Melbourne, with at least 2,300 apartments in the pipeline, including the 3.3-hectare former Kinnears Ropes site in Ballarat Road, Footscray, which could yield as many as 2,000 apartments.

The other prominent location for Chinese developers is the Gold Coast, which represents 12% of the total Chinese-backed proposals. The massive three-tower Jewel project dominates this interest. The AU$1 billion project recently received state government approval and may kick off within the next 12 months. The project will include a six-star hotel and two residential towers.

Jewel's northern tower will have 215 luxury apartments over 41 levels; the central tower will be a six-star hotel with 300 suites and apartments over 45 levels; and the beachfront tower will have 108 premium residences over 35 levels. There will also be office and retail space and a host of resort facilities.

Jewel is being proposed by the Zhuhai Ridong Group and is likely to be completed by 2016, a time when the current oversupply of apartments on the Gold Coast is expected to be well and truly absorbed. Chinese developer Yan Jian is also active in the Gold Coast market.

Showing that Chinese developers are not just active in the larger Australian cities, the Datong Investment and Development Group is proposing two schemes in Adelaide, both in the CBD. The 123 Flinders Street scheme is particularly notable for its very bold design and is proposed to be the tallest building in the city at 39 storeys, a height only recently allowed under new planning controls. The same developers are also proposing the Aria on Gouger project on Gouger Street.

It’s perhaps surprising Chinese developers are not more active in Sydney, given the size of the city, its popularity with Asian visitors and the large number of Chinese apartment buyers in that market. Only 6% of Chinese-backed apartments are actually in Sydney, compared with 35% overall for offshore developers. There is further scope for Chinese developers to move into the Sydney market, but for now, the Singaporean-based groups have established the lead position among the offshore developers.

But why such a pronounced trend in Chinese and offshore developers, and why now? There are many drivers to this trend that have come together at this time, including:

The globalisation of property investment and development companies, looking to simultaneously grow business and spread risk by tapping into a number of different demand cycles and sized markets.
Coupled with point 1 is the significant growth of equity capital, particularly in China and the desire to invest part of this into “safe haven” destinations. Australia is considered a reliable investment location and place to do property business, with a secure land tenure system.
Like other property sectors, the price of residential development sites is generally low in Australia at present, coupled with reduced local appetite to acquire. Buying at this low point in the cycle will improve development feasibility and returns. Some previous site owners have been in a financially distressed state, particularly in suburban or country areas, with these sites being sold through receivers. Most site acquisitions by offshore groups have occurred since the global financial crisis, with this activity peaking in 2010-11.
Housing in most parts of Australia is undersupplied, particularly for reasonably priced products. This situation has been created by years of high interest rates and increasing developer charges being passed on to the end product. The present low confidence caused by global economic uncertainty is further compounding generally low levels of buyer demand, particularly in greenfield housing markets.
The market popularity of inner-city apartment living close to transport, retail and education continues to be high, and this is where most apartments being developed by offshore groups are being proposed and built. This well-defined sector of the market is running counter to the general greenfield housing market at present.
Population growth in Australia remains high, and provided developers can meet the parts of the market where demand is highest there remains a good chance of achieving a successful project with high returns and low risk in a transparent, regulated industry.
Marketing of apartments directly into a developer’s home country has also opened sales to a purchaser group familiar with the developer’s product and has proved successful in reducing development risk by spreading the buyer catchment.
Various governments in Australia have and still provide incentives to purchase new dwellings (below a price point, which is typically in the middle market) and particularly for new apartments. These incentives can take various forms, such as a stamp duty concession or a first-home owners’ grant. These schemes appeared to have brought forward purchasing decisions and the termination of the schemes can lead to a spike in off-the-plan pre-sales and distortion in the cycle of transaction volume.

The risk around apartments developed by Chinese or offshore developers appears to be little different from the risk of those developed by local companies. Off-the-plan sales of individual apartments can remove part of the development risk, although risk is then transferred to settlement.

A number of the projects being developed by offshore groups have experienced a high proportion of sales to parties from the country of the developer or countries other than Australia. This does raise the prospect of the developer (or financier, if relevant) not being familiar with the buyers and reduces the ability to trace the ultimate source of funds for settlement.

Yet there appears to be no evidence through this cycle of this risk being realised to a point that has jeopardised the construction and completion of a residential project developed by an offshore company.

In some ways, offshore developers are in a fortunate position to be able to tap into large offshore buyers groups through existing contacts, opening up a source of equity capital not otherwise familiar to Australian developers.

The other obvious risk is oversupply in concentrated locations, leading to the potential for softening in achievable prices for off-the-plan sales. However, were this potential to be realised it should be revealed through difficulty or lack of pre-sales and a response by the developer to defer or alter a project.

Much has been written globally about Australian property prices being too high. Australian residential prices have grown over the longer term on the back of moderate but sustained levels of economic growth, coupled with population, employment and wages growth.

Add to this a general undersupply of dwellings nationwide and a conservative lending policy among domestic banks, and residential pricing appears to have been well supported to its current position. Unless all of these drivers unwind, it appears unlikely the median pricing levels of residential property will adjust downwards in the near term.

Provided offshore (and local) developers continue to carefully respond to the nature of demand for apartment product coming from the marketplace, in terms of product location, concentration, design, pricing, etc. then the supply-side risk appears to be manageable.

Although the connection of the Australian, Chinese and more generally, the Asian economies is a long and growing one, the relationship through the real estate sector still has a long way to develop.

Kevin Stanley is an independent real estate analyst with over 20 years' experience in property market research and urban planning. He is located in Sydney, Australia, and can be contacted via email.

Read more: http://www.propertyobserver.com.au/china-watch/eight-reasons-chinese-residential-developers-have-emerged-as-a-major-force-in-the-australian-market-kevin-stanley
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Timo
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Well this isn't surprising, Australia seems to be dreaming of a day that every thing in this country and every part of our identity is Asian or otherwise foreign owned.

Spurred on by our un-Australian government prostitutes and greedy property pigs desperate for a quick buck and golden handshake.

Sickening.
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
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Chinese developer to transform Parramatta

May 7, 2014 - 12:39PM
Toby Johnstone

It's known for building mega communities in the Chinese city of Wuhan where thousands of residents live in 50-storey towers.

It's a real estate giant that develops more than 1 million square metres of property a year and is part of a conglomerate that annually turns over more than $8 billion.

And it has arrived in Sydney with plans to dramatically develop the banks of the Parramatta River with a $550 million project comprising 774 apartments starting next month.

Starryland Australia, an offshoot of China's Fuxing Huiyu Real Estate Company, is building Promenade – an 11-tower, 12-storey development that will create a new "gateway" to Sydney's second city.

"Promenade is in keeping with the style of residential communities we create in China," Starryland Australia director Hao Liu said. "We want it to set a benchmark to establish our credentials in Sydney as a quality developer.”

The agent entrusted with selling the project, Irene Lau of Savills, said buyer interest had been strong.

"A lot of parents have their kids coming into Australia to study . . . so the parents say: 'OK, we can put them there'."

Local couples and retirees had also shown interest, Ms Lau said.

On Saturday the first two buildings comprising 124 apartments were offered to registered parties at the Park Royal in Parramatta.

All sold at the weekend with prices ranging from $399,000 for an "open plan" one-bedroom apartment to $900,000 for a three-bedroom unit.

A further 153 apartments will be offered at the official launch in late June when the display apartment has been built.

Compared with developments in China, Ms Lau said Promenade was small-time.

"In Wuhan they sell like 1000 units a day," she said.

Starryland Australia has no plans to stop at Parramatta. On top of its $58 million land acquisition in Sydney's west the firm has spent $18 million securing a prime development site in Melbourne's Southbank.

"They've come here and they want to be a long-term player in the market," Ms Lau said.

"They want to do big developments. They have many plans . . . and they have the money.

"Basically in China they are one of the big boys."

Read more: http://smh.domain.com.au/real-estate-news/chinese-developer-to-transform-parramatta-20140506-37ulz.html
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Chogueler
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Starryland refers to the Star in our Solar System. You can actually see it from here.

It's actually almost impossible to see in the sky from Chyna.
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Ex BP Golly
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Faark!

Do b they have street lights on during the day in China, Chocka?
Edited by Ex BP Golly, 7 May 2014, 05:21 PM.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Kulganis
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Chogueler
7 May 2014, 03:00 PM
Starryland refers to the Star in our Solar System. You can actually see it from here.

There is only one star in our Solar system, and that is Sol (hence Solar System), commonly referred to as the sun.

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It's actually almost impossible to see in the sky from Chyna.
What rubbish, China gets just as much sunlight as most of the rest of the planet, other than at the poles.
Edited by Kulganis, 7 May 2014, 05:15 PM.
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Frank Castle
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Business As Usual

Chogueler
7 May 2014, 03:00 PM

It's actually almost impossible to see in the sky from Chyna.
You really are an A grade wanker
The sky is everywhere except from up your own arse - is that why you cant see it?

Posted Image

Posted Image

I suppose you'll tell us next they "made" some sky especially for photograph day?
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The forum fuckwit goes RRRAAARRRGGHHhhh - But not a fuck was given..................by anyone.
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Massive
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beautiful blue sky day in shanghai today...
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Ex BP Golly
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Chogueler
7 May 2014, 03:00 PM
Starryland refers to the Star in our Solar System. You can actually see it from here.

It's actually almost impossible to see in the sky from Chyna.
Hmmmm. Starry?

Seems a bit plurally .

If it was just about the sun, they would be called "starland" no?


Massive
7 May 2014, 07:25 PM
beautiful blue sky day in shanghai today...
Havent you heard of photoshop.

The chinese communist party are so good at using it, they only tricked you! :D
Edited by Ex BP Golly, 7 May 2014, 08:32 PM.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Massive
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Ex BP Golly
7 May 2014, 08:30 PM
Hmmmm. Starry?

Seems a bit plurally .

If it was just about the sun, they would be called "starland" no?



Havent you heard of photoshop.

The chinese communist party are so good at using it, they only tricked you! :D
maybe they are spraying blue paint into the air outside my window and toxic fumes have deluded me into believing its real sky colour
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