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FOREIGN         INVESTMENT IN         AUSTRALIAN         PROPERTY         MARKETS         WHAT’S SET         TO UNFOLD    ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON    FOREIGN INVESTMENT IN AUSTRALIAN    PROPERTY MARKETS    A               ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON                                         SYDNEY A ‘WORLD CLASS’ CITY AND A  ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON    CROWN GROUP SEEKS OUT ASIAN    BUYERS FOR TOP RYDE PROJECT              ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON    FOREIGN DEVELOPERS GRAB 30% SHARE    OF AUSTRALIAN APARTMENT MARKET:    ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON    FOREIGN DEVELOPERS GRAB 30% SHARE    OF AUSTRALIAN APARTMENT MARKET:    ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON    FOREIGN DEVELOPERS GRAB 30% SHARE    OF AUSTRALIAN APARTMENT MARKET:    ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON    FOREIGN DEVELOPERS GRAB 30% SHARE    OF AUSTRALIAN APARTMENT MARKET:    ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON    MORE PAIN FOR REGIONAL HOTELS AS    CHINESE TOURISTS PREFER CITY OVER   ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON     MORE PAIN FOR REGIONAL HOTELS AS     CHINESE TOURISTS PREFER CITY OVER ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON     CHINA’S PROPERTY SLUMP BAD NEWS FOR     RESOURCES BOOM: ANZ     D      ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON                                CHINA’S PROPERTY SLUMP BAD NEWS FOR         ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON     POINT COOK’S GOLDEN WATERS POPULAR     WITH CHINESE BUYERS     N       ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON     CHINESE INVESTORS EYE AUSTRALIAN     FARM PROPERTY        Qfamilyain Au...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON     SOUTHBANK’S BANQUE88 SHAPING UP     C             hinese developer CBD ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON                               MELBOURNE’S EASTERN SUBURBS                  ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON                                 HOW TO UNDERSTAND CHINESE                  ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON     HOW TO UNDERSTAND CHINESE     BUYERS: ANDREW TAYLOR (CONTINUED)       A...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON     ASIAN BUYERS VITAL TO AUSTRALIAN     PROPERTY MARKET: MORRY SCHWARTZ   ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON     AZURE DEVELOPMENT DRAWS CHINESE     INTEREST                           ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON     CHINESE INVESTMENT IMPORTANT FOR     AUSTRALIAN PROPERTY: TED BAILLIEU ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON                                             POINT PIPER ON THE CHINESE TOUR...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON     SINGAPOREAN INVESTORS BUYING OFF THE     PLAN IN PERTH     S           ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON     APARTMENT PRICES COULD FALL IF     CHINESE BUYERS PULL BACK:     ROBERT...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON     APARTMENT PRICES COULD FALL IF     CHINESE BUYERS PULL BACK: ROBERT    ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON     UNDERSTANDING THE FOREIGN     INVESTMENT REVIEW BOARD      T         he...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON     UNDERSTANDING THE FOREIGN     INVESTMENT REVIEW BOARD     (CONTINUED)  ...
WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON     CHINESE APPETITE FOR GOLD COAST     PROPERTY SOARS TO RECORD HIGHS:    ...
Foreign Investment In Australian Property Year Of The Dragon
Foreign Investment In Australian Property Year Of The Dragon
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Foreign Investment In Australian Property Year Of The Dragon

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Foreign Investment In Australian Property Year Of The Dragon

  1. 1. FOREIGN INVESTMENT IN AUSTRALIAN PROPERTY MARKETS WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON www.propertyobserver.com.au
  2. 2. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON FOREIGN INVESTMENT IN AUSTRALIAN PROPERTY MARKETS A luxury waterfront home at Castle An interesting detail in the trend is that Cove on Sydney’s Middle Harbour Chinese-Australian families are lead- sold for $6,066,000 last year. It ing the way with purchases of dual-key was certainly a strong sale price – and apartments because they suit inter-gen- something of a give-away that the buyer’s erational living – with, say, an elderly origins were mainland China. relative or young university student living Asian buyers and investors are a key independently in a one-bedroom space, influence within some sectors of the internally connected to the family’s larger Australian property market, defying the apartment. strong Australian dollar and underpinning The good educational opportunities, demand for property. its geographic proximity, the wealth of Earlier this year Savills announced the attractive assets, political stability and a sale of the luxury penthouse at Lumiere predictable legal and banking environ- Residences Sydney for $8.1 million. ment all make Australian an attractive It went to a Thai buyer – another sale destination for investment. highlighting that Asian buyers continue This eBook looks at recent times and to seek opportunities to acquire premium envisages what could unfold in the Year properties in Sydney’s central business of the Dragon. district. But proximity to the centre of town isn’t the only requirement for the Asian buying dollar. Being close to schools and uni- versities are key components of buying desires of Australians of Asian heritage and Australia-based Asian nationals. There’s understandably been good buy- ing interest in the Central Park project at the Sydney CBD’s Broadway precinct given its proximity to top education institutions. Launched in 2010, Central Park has not been formally marketed in Asia, but it is clear there is a strong, infor- mal referral network at work between Australia and China, Singapore and Indonesia. It highlights the well-established cultural acceptance of apartment living within the Asian community – with this trend now extending from the CBD to other high-rise JONATHAN CHANCELLOR, EDITOR, PROPERTY OBSERVER suburbs like Chatswood.2 www.propertyobserver.com.au
  3. 3. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON SYDNEY A ‘WORLD CLASS’ CITY AND A SAFE HAVEN FOR ASIAN INVESTORS “Sydney is geographically very well Qin Australia? . I am a foreign person. Can I invest in property placed to benefit from investment from frustrated Chinese and other Far Eastern Yes, depending on what you wish to invest in. investors, but they will need to open up Acquisitions of residential real estate require prior their markets to such investors to trigger foreign investment approval before the purchase can this,” according to Savills research. proceed, though there are certain exemptions. “The city’s undersupply of accommoda- Certain acquisitions of commercial real estate also tion and high in-migration plus restrictions require prior foreign investment approval. on new development, due to zoning and All Q&As sourced from the Foreign Investment Review Board geography, are likely to keep prices the highest of any Australian city.” T Savills describes Sydney as beginning he inclusion of Sydney in Savills’ to display many of the common character- landmark World Class Index high- istics of the World Class city – constrained lights the city’s emerging standing land supply, increasing pressure from in the world of prestige international prop- overseas investors and high demand for erty, offering a safe haven for international prime accommodation – but it is unusual investors, particularly from Asia. in offering very spacious living accom- The 2011 Savills report on the world’s modation in relation to other leading 10 leading prestige property locations for international investment locations. international investors suggests Sydney is “Asian interest in residential develop- positioned to benefit from the both the “old” ments within the Sydney metropolitan and “new” world economies it bridges. area is at an all-time high, with both Asian Savills NSW research director Simon developers and private investors making Hemphill believes Sydney is seen as a substantial investments in the market,” stable old-world investment choice with Hemphill says. a well-established luxury housing market, “Anecdotally, almost a third of residen- while also in close proximity to the boom- tial projects in the Sydney metropolitan ing new-world economies of Asia Pacific. area currently under construction or being Luxury Sydney property also repre- actively marketed are owned by Asian sents very good value on the global stage, development companies. according to Savills, which ranks Sydney “Private investors from Asia also make as the cheapest location for global billion- up a significant portion of buyers for inner- aires, while also offering the largest size city residential developments, such as the of homes for the super-wealthy, at almost Frasers Property Central Park develop- 1,900 square metres. ment in Broadway, in the Sydney market. “Overall, Sydney still offers international Indeed, circa 25% of purchases made so investors great value and is extremely far in the Central Park development were well-located to take advantage of Asian by south-east Asian private investors. This wealth if and when its policies restricting trend is set to continue, given the nature international buying are relaxed,” Hemp- and location of a number of developments hill says. currently mooted in and around Sydney.”3 www.propertyobserver.com.au
  4. 4. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON CROWN GROUP SEEKS OUT ASIAN BUYERS FOR TOP RYDE PROJECT 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 C meditation platform, sit and read a book in rown International Holdings the beautifully landscaped gardens, swim Group enters the Year of the a few laps of the pool or head to the gym Dragon with ongoing projects for some exercise or yoga,” says Sunito. that will generate apartments with an end Crown Group’s $500 million Top Ryde value of more than $2 billion. City Living project, one of Sydney’s larg- Crown has also announced plans to set est residential property developments, is up a display pavilion in the heart of Syd- currently being pre-sold, and Crown has ney’s Chinatown later this year to better launched marketing initiatives in Jakarta, meet the needs of the Chinese community Indonesia in 2011, with further roll-outs in and visitors to Sydney. Shanghai, China and Singapore planned Crown International Holdings chief for 2012. Iwan Sunito says prospective buyers or Top Ryde City Living has been pre- investors will be invited to relax in very approved by the Australian Government’s comfortable surrounds while they have Foreign Investment Review Board to the opportunity to converse with one of accept non-Australian resident purchas- Crown’s international and multi-lingual ers, so foreign investors are assured there sales consultants, who are fluent in a vari- is no approval process required or uncer- ety of languages including Indonesian, tainty in being allowed to purchase. Korean, Mandarin and Cantonese. Crown offers foreign investors a 5% “The vibrant and dynamic display pavil- rental guarantee for one year. ion will provide locals and international “We have had a great response to the visitors with detailed information about the first release of Top Ryde Living City with various Crown projects, as well as being approximately 90% already sold and only able to experience a display apartment,” 26 apartments remaining for sale in stages Sunito says. 1 and 2, which range from $500,000 for a “Crown understands it’s important to one-bedroom plus study with car space to provide all of our clients with detailed $875,000 for a three-bedroom plus study information for each of our developments, and two car spaces,” Sunito says. and we believe it’s important to provide The next launch will be in March with this service in a person’s first language the release of 135 apartments, says Kym wherever possible.” Rogers, head of sales and marketing.4 www.propertyobserver.com.au
  5. 5. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON FOREIGN DEVELOPERS GRAB 30% SHARE OF AUSTRALIAN APARTMENT MARKET: CBRE’S KEVIN STANLEY I n a major trend that mirrors current Qproperties can I How many investment into the commercial real . estate market, foreign-based companies have moved firmly into the business of purchase? developing residential apartments across There are no Australia. More than 13,000 apartments restrictions on the are presently either planned, being number of properties marketed or are under construction by you are permitted foreign companies in 37 separate projects. to purchase, unless Based on average apartment completions you are a temporary in Australia each year, this represents a resident and want market share as high as 32%. to acquire more than one established SINGAPOREAN AND HONG KONG (second‑hand) DEVELOPERS LEAD THE PACK dwelling as your principal place of Asian developers account for 92% of all residence. apartments presently being proposed or developed by foreign companies in Aus- tralia. The balance is split almost evenly The next most significant source of between the USA, Canada and an as-yet- development capital is Hong Kong, with unknown country source. See Chart 1 for a single developer (Far East Consortium) details. Developers from Singapore are behind 2,700 apartments in two Mel- proposing or building more apartments in bourne projects. Australia than devel- opers from any other foreign country at pre- sent, by a big margin. Singaporean devel- opers are responsi ble 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.5 www.propertyobserver.com.au
  6. 6. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON FOREIGN DEVELOPERS GRAB 30% SHARE OF AUSTRALIAN APARTMENT MARKET: KEVIN STANLEY (CONTINUED) DEVELOPMENT IS WIDESPREAD In a surprising result, Melbourne has a greater number of apartments proposed Apartments are being proposed or built by foreign developers than Sydney, by foreign developers in a wide range of despite being a city with 450,000 fewer locations across Australia and not just in people. the bigger capital cities. Chart 2 shows the num- ber of apartments by location. The distribution tends to follow the size of the cities. The biggest mar- 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), Location by submarket varies widely, Brisbane (6%), Perth (3%) and Adelaide as shown in Chart 3. Melbourne is expe- (2%). 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 foreign developers generally into the Bris- bane market to date, with a greater focus on nearby Gold Coast instead.6 www.propertyobserver.com.au
  7. 7. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON FOREIGN DEVELOPERS GRAB 30% SHARE OF AUSTRALIAN APARTMENT MARKET: KEVIN STANLEY (CONTINUED) IN THE PIPELINE countries. Rather than potentially over exposing their business to the economic/ The trend of foreign companies actively consumer cycles of just their home coun- developing residential property in Aus- tries, these companies are spreading tralia appears to have a long way to run. operations with the aim of tapping into dif- Only 40% of the apartments being facili- ferent cycles. tated by offshore developers are under construction and more than 7,500 apart- 2. Australia is considered a market with ments are in the development pipeline. steady, reliable demand. Foreign devel- Many of the large-scale projects, par- opers see Australia as a growth-style ticularly in the bigger markets of Sydney, economy, with steady occupier and inves- Melbourne and the Gold Coast are staged, tor demand for the end apartment product. which will allow for adjustment to market Foreign developers believe, while there delivery according to demand and this will are cycles to be mindful of, that inevita- limit development risk. Off-the-plan pur- bly the underlying growth of the Australian chasing is common and will also allow for economy and the population will provide individual stages or projects to proceed in opportunities to sell finished product. line with demand. Recent project launches suggest 3. Shifting equity to a safe country. By demand from end purchasers for well shifting equity into Australia to develop located and quality product remains high, residential apartments, some developers with reports of almost whole project stages are seeking to find a “safe haven” for this being sold out on launch weekend, lead- capital. ing to future stages being brought forward. 4. Dwelling starts are at a low point in WHY THIS TREND, WHAT ARE THE the cycle in Australia. Recent high mort- IMPACTS AND WILL IT CONTINUE? gage rates and residential prices have suppressed overall buyer activity and There appears to be a confluence of caused dwelling starts, for both houses reasons why this trend has emerged and apartments, to drop to a cyclical low. so strongly in the past few years, some This means in most markets, there is less of which are similar to the motiva- competition for those developers who can tions behind the current high level of facilitate projects, while strong underlying commercial property investment from user demand remains in most locations. offshore. Some of these reasons are: 5. Development site costs are relatively 1. Diversifying risk and providing for low in the pricing cycle. There have been business growth in new markets. Many a large number of development sites on of the foreign companies developing the market over the last few years in the residential apartments in Australia are wake of the global financial crisis. This well-established businesses in their home has led to a drop in prices of anywhere7 www.propertyobserver.com.au
  8. 8. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON FOREIGN DEVELOPERS GRAB 30% SHARE OF AUSTRALIAN APARTMENT MARKET: KEVIN STANLEY (CONTINUED) QAustraliansame-sexAm I exempt ifwithpurchase I am in a . citizen. relationship we an 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- Some concerns have been expressed cally in the 20% to 30% range. Foreign about the potential for exacerbating the developers have taken advantage of this apartment oversupply situation in the Gold situation, improving development feasibil- Coast, with 1,350 units proposed there by ity by purchasing at a lower rate. foreign developers. However, we think that given the lead time for the approval and 6. A relative ease of doing property development of such large-scale projects business. While there are always improve- and provided they are carefully pitched ments to be made, foreign investors and to meet demand, this product should be developers tell us Australia is a relatively readily absorbed into the local market. easy place to do property business. It is Despite some concern for oversupply highly transparent, heavily informed and and settlement risk, the apartments devel- enjoys high security of real estate tenure. oped by foreign companies appear to have been well received into the local market, The impacts of foreign involvement in with a high level of sales off the plan and the apartment market are many and are projects proceeding to completion. We mostly positive. Critically, it’s providing see the risk of apartments developed by a stimulus to the foreign-based companies as no different construction sec- to those of domestic companies. tor at a time when The drivers of this significant trend development appear likely to continue. With strong activity is generally growth in equity capital, especially in Asia, at a low level. looking to geographically diversify and Second, it’s pro- reasonable levels of demand for the end viding new ideas, product driving solid development returns standards and in Australia, subject to micro-market con- designs to broaden ditions, we expect this trend to continue the product range into the future. in Australia and introduce fresh KEVIN STANLEY competition in EXECUTIVE DIRECTOR FOR GLOBAL these areas. RESEARCH, CBRE8 www.propertyobserver.com.au
  9. 9. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON MORE PAIN FOR REGIONAL HOTELS AS CHINESE TOURISTS PREFER CITY OVER COUNTRY: RBA R egional hotel operators must find ways of enticing Chinese visitors to coast and country resorts or risk Qapproval to inherit Do I need . another decade of struggle, according to property someone left the RBA’s December 2011 quarter bulle- me in their will? tin. The RBA forecasts growth in Chinese No, you are visitors alone is expected to contribute not required to about one-third of the growth in Australia’s apply for foreign tourism export earnings until 2020. investment approval. Between 2001 and 2011, Chinese visitor Any acquisition of numbers have grown by 13.4% annually, residential property by contributing 16.4% to annual revenue, way of an inheritance while Indian arrivals have increased by (settlement of a legal 12.3% annually, contributing 7.7% to will) or by a court tourism revenue. In comparison, visitors ruling is exempt from numbers from the US and UK have not the requirement grown over the last decade. 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 capital cities as major international gate- 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.” According to the Tourism Forecast- “This trend is consistent with the strong ing Committee, the share of spending growth in Chinese visitors – who dem- by international visitors in total tourism onstrate a strong propensity for travel to expenditure in Australia is tipped to con- capital cities – and the decline in Japanese tinue to rise over the next decade, driven tourists that has had a more pronounced principally by strong arrivals from Asia. effect on overall tourism demand in some “This poses a challenge for the tour- regional destinations.9 www.propertyobserver.com.au
  10. 10. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON MORE PAIN FOR REGIONAL HOTELS AS CHINESE TOURISTS PREFER CITY OVER COUNTRY: RBA (CONTINUED) 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 on Great Barrier Reef islands and adja- “For instance, in 2010-11, Sydney and cent mainland areas (including the likes of Melbourne were the most popular destina- Port Douglas) were down 21% over this tions for Chinese visitors (as measured by time frame. BURRAGA ISLAND ON THE NSW SOUTH COAST SELLS TO CHINESE INTERESTS B urraga Island, a 121-hectare erry and the southern village of Terara. Shoalhaven River island, sold for The purchasing entity gives its director $2.5 million to Chinese interests in as the Shanghai-born property developer late June 2011. Quan (David) Fang and its beneficial own- It is one of a handful of privately owned ers as Beauty Castle Enterprises, a British NSW coastal islands, hardly paradise, but Virgin Islands-based company. its sale price ranks it among the many Although there appear to be no formal tropical island counterparts. links, Fang is also a director of ASF Group, It was sold recently, ending 34 years of the publicly listed company that operates Kennedy family ownership of the island. in Australia and through subsidiaries and It is about six kilometres up from the investments in controlled entities across coastal Comerang Island, not far from the China, with a focus on mineral resources Princes Highway, Nowra Bridge. It is set and energy, property marketing and travel between the northern village of Bomad- services.10 www.propertyobserver.com.au
  11. 11. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON CHINA’S PROPERTY SLUMP BAD NEWS FOR RESOURCES BOOM: ANZ D emand for Australian commodities could take a hit if the cooling Chinese property market QaItemporary do not hold . continues to slump. residency visa but According to ANZ’s China economists I wish to purchase Li-Gang Liu and Zhou Hao, Chinese residential property authorities have “been actively cooling Do I need to seek an overheating property market for the approval? last two years”, with both Chongqing and Yes. Applications Shanghai “experimented with a property by foreign persons to tax”. acquire residential In addition, more than 20 first- and real estate will be second-tier cities (the major capital cities approved if they and secondary provincial capitals) have meet the eligibility imposed a “non-resident purchase restric- criteria. If you are not tion policy”, while an ambitious public eligible for approval housing program that aims to build 10 mil- under the policy, then lion affordable houses in 2011-2012 and the acquisition is 36.5 million by 2016 is expected to sub- generally considered stantially reduce demand in the private to be contrary to the housing market in the foreseeable future. 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 biggest price decline since the introduc- 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.11 www.propertyobserver.com.au
  12. 12. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON CHINA’S PROPERTY SLUMP BAD NEWS FOR RESOURCES BOOM: ANZ (CONTINUED) They warn that because the property property investment,” they say. sector is a “central pillar for the Chinese “A slump in the property sector will have economy” the impact of a slump on the significant repercussions for related indus- economy would be compounded by the trial sectors… Key linkages include the lack of an alternative growth engine and upstream industries of steel, cement and the weak external demand for the foresee- building materials; downstream industries able future. of automobile and home appliance; and “There is a close link between property the intermediate sectors of banking and sales and fixed asset investment, with a advertising,” say Li-Gang Liu and Zhou weak property market leading to slower Hao. QifIIam a foreign estate through an recently told that I wouldcompany or unit . bought real national and was Australian incorporated not need approval trust that has at least one Australian director or shareholder/unitholder. Is this true? No, and moreover, the FIRB would like to know the source of such advice so that we can advise them accordingly. Australian incorporated companies or trusts where 15% or more of the shares or units are beneficially held by foreign persons are themselves considered to be “foreign” under the Act and policy. It is wise to talk to the FIRB about particular structures before making any offers on property.12 www.propertyobserver.com.au
  13. 13. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON POINT COOK’S GOLDEN WATERS POPULAR WITH CHINESE BUYERS N ewland’s Sanctuary Lakes development in Point Cook, 30 kilometres west of Melbourne, has Qbefore apply a Can I . finding attracted considerable interest from Chi- property? nese buyers, with 90% of buyers Chinese No, foreign investors or owner-occupiers. investment approval is The development launched in mid-2010 required for a specific and has sold 90 of the 98 lots available. property you wish to The final 14 lots were released in January acquire. You cannot 2012, and the civil construction was com- apply for a general pleted in June 2011. or ‘in principle’ Golden Waters is within the master- pre‑approval. planned 61-hectare Sanctuary Lake community, designed around an 18-hole Greg Norman-designed golf course near a nature reserve and Port Phillip Bay. “With its prime location within the award- Sanctuary Lakes has received a lot of winning Sanctuary Lakes, coupled with the attention, winning the 2004 Greensmart proximity to the city at just 23 kilometres Award, the National Environmental Excel- as the crow flies, Golden Waters offers an lence award and the Australian Property ideal investment for the future, as well as a Institute Development of the Year in 2004. coveted lifestyle choice for today.” “Boasting uninterrupted vistas over the Developer Newland and home builder sparkling lake network and beyond to Mel- Metricon are behind Golden Waters, bourne’s city skyline, this is an incredible which also includes a pool, gym, sauna, offering not to be missed,” says Newland massage facilities and tennis courts for marketing manager Melissa Tilley. residents.13 www.propertyobserver.com.au
  14. 14. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON CHINESE INVESTORS EYE AUSTRALIAN FARM PROPERTY Qfamilyain Australia. Can I buy a second- I am foreign person who regularly visits . hand property with a family member who is an Australian citizen/permanent resident? No. As a foreign non-resident, you are not permitted to acquire any interest in second-hand residential property, irrespective of whether you purchase it solely in your name or jointly with eligible persons (Australian citizens, permanent or temporary residents). A delegation of Chinese investors chain that is available for them to use as inspected several farming proper- a third party. The Great Southern region ties in Western Australia’s Great ships through the Albany port zone. Southern food bowl in August 2011. “The delegation was responsive, and It included representatives of the Bei- farmers here like the idea. I have been dahuang BDH Group, a state-owned fielding a lot of calls from farmers I know company that has 5 million hectares in wanting me to introduce the delegation to China’s Heilongjiang province. them,” he says. The arrival of serious interest from Chi- So far the delegation has inspected nese in agricultural land has divided local properties that are already on the market, farmers and the WA Farmers Federation. and foreign investors already own one – The delegation of about a dozen people, the Lake King property. which included agronomists, farmers and “The Chinese take their food security government officials, toured grain farms at very seriously. One of them told me they Lake King and Ongerup with a local agent. produce 1.2 billion tonnes of grain and Nearby Lake Grace farmer and WA that is not enough,” Clarke says. Grains Group chairman Doug Clarke says “Where we only produce about 3% of that he has had three meetings with the the world’s grain. We are very small in delegation regarding investment in local comparison.” agricultural land. The WA Farmers Federation has “The Chinese buy or lease farms in expressed serious concerns about inter- Brazil, Argentina, New Zealand and North est from China in 80,000 hectares of prime Africa and in return they develop excellent Western Australian cropping land. infrastructure,” he says. Federation president Mike Norton Great Southern farmers have made it believes if a large swathe of farmland falls clear to the Chinese they that want good under single ownership that many rural port access and a sophisticated supply towns in the regions will disappear.14 www.propertyobserver.com.au
  15. 15. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON SOUTHBANK’S BANQUE88 SHAPING UP C hinese developer CBD is create note that for the ones they are intending an unusually shaped 22-storey to rent out initially, in the long run they are building in Southbank, in inner earmarked for family members, especially Melbourne, called Banque88. Urban kids”. Design Architects has designed the pro- He says the proximity to Crown Casino ject, which will resemble New York’s has been a big selling point for Chinese famed Flatiron building. buyers, and the marketing is designed to The development is at 33 Clarke Street catch their attention. but chose its name to be lucky in Chinese “Our marketing is heavily towards the numerology. It is advertised in Chinese Chinese buyers in that the brochures are newspapers, and about half of the 27 red (lucky), the number 88 is prominent apartments so far sold have been to Chi- (even though it’s at number 33 Clarke nese buyers. Street) and also the display building has Paul Raimondo of Castran Gilbert, who red lanterns hanging up,” Raimondo is marketing the property, says about half advises. of the Chinese buyers are owner-occupi- Construction is expected to begin in ers and half are investors. February 2012 and be finished in the mid- However, he says, it is “interesting to dle of 2013. MELBOURNE’S EASTERN SUBURBS POPULAR WITH ASIAN BUYERS A sian buyers look set to increase suburb to attract interest from Asian buy- their investments in Melbourne’s ers during the Chinese New Year season. upper-middle-class eastern sub- “Glen Waverley has a very large Asian urbs over the Chinese New Year period. community with varying financial means. Popular suburbs include Glen Waverley Therefore we sell homes [to Asian buy- and Balwyn, with a desire to own prestige ers] from $400,000 to $2.5 million,” says property, feng shui alignment and access Moore. to better schools among the reasons why Moore says most of the suburb’s Asian Asian buyers have bought homes recently. buyers come from mainland China, Malay- The Ray White Glen Waverley office has sia, Singapore and Indonesia. recently sold a number of homes in the $2 “Often the grander the house, the bet- million-plus price bracket to wealthy main- ter – financial status at the high end of our land Chinese buyers. market is very important. Director Damian Moore expects almost “But you can’t beat good old ‘feng shui’ every property currently up for sale in the – most buyers will consider direction of15 www.propertyobserver.com.au
  16. 16. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON MELBOURNE’S EASTERN SUBURBS POPULAR WITH ASIAN BUYERS (CONTINUED) the home, adjacent streets, low side/high than $100 million in buying Melbourne Qvisa validbusiness I have a . for three side, front door opposite back door, stair- case facing the front door,” he explains. development sites in the past 18 months. Last year Asian developers snapped years, but it only About 14 kilometres west of Glen up a 3,200-square-metre site at 224-250 allows me to stay for Waverley, the affluent suburb of Balwyn La Trobe Street for $29.2 million with periods up to three has also experienced an influx of Asian potential for more than 500 apartments months at a time. Am buyers wanting to own property in the while Singapore construction and prop- I eligible to buy an Balwyn High School zone bounded by the erty group Chip Eng Seng bought an established (second- Eastern Freeway and Whitehorse Road. 8,000-square-metre office building on a hand) dwelling? According to Tim Heavyside of Fletch- 900-square-metre block at 150 Queen No. You must be ers Real Estate, property purchases by Street for $25.5 million, with plans to con- living in Australia aspirational Asian families have increased vert it for residential use. Both deals were from an average of 20% of Balwyn home negotiated by Savills. (not just visiting or buyers in the zone 10 years ago to about Another residential development site at staying for short 60% of all purchasers currently. 420 Spencer Street (2,250-square-metre periods of time), and “They may decide rather than invest site with a permit for 368 apartments) your temporary visa $25,000 in school fees every year, I’ll uti- has registered interest from Asian buyers must allow you to lise that in travel and educate my child in including SP Setia and Mammoth Empire stay in Australia for a life, but they still get the benefit of being Holdings, both from Malaysia, as well as continuous period of at the fourth-best school in the state,” private developers from mainland China. more than 12 months. Heavyside says. In total more than half of the 17 proper- According to Moore, selling to Asian ties sold by Savills since March last year buyers comes with its challenges. with residential development potential “Most Asian buyers are very hard nego- were snapped up by Asian buyers. tiators – they remain non-emotional about According to Savills divisional direc- the purchase and must always feel in con- tor of CBD sales and investments Nick trol,” he says. Peden, Asian developers have bought Melbourne real estate is not just proving eight properties, averaging $12.5 million, popular with Asian families – Asian com- since March 2010. panies are also entering the market. “Melbourne offers sustained population Asian property developers are making growth, inexpensive land compared to major plays in the Melbourne apartment home markets, the potential for significant market, with Hong Kong-based Far East growth, the benefit of freehold title, and its Consortium building 2,600 apartments in stature as the world’s most liveable city,” the billion-dollar Upper West Side project says Peden. on Lonsdale Street. Investors in the pro- In a recent report on the influx of Asian ject come from Malaysia, mainland China, property developers, CBRE said Mel- Korea and India. bourne was proving more popular with Savills reported late last year that foreign developers than Sydney due to investors and developers from China, larger sites being available on the north- Singapore and Malaysia had spent more ern edge of the city.16 www.propertyobserver.com.au
  17. 17. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON HOW TO UNDERSTAND CHINESE BUYERS: ANDREW TAYLOR A manda Sun bought three houses to do so soon. These percentages account worth a total of $3 million on the for huge numbers of individuals, because Gold Coast after visiting just once China has the fourth-largest number of as a tourist. high-net-worth individuals in the world. Sun is Chinese, 33 years old and owns Each year the cohort grows by nearly a small trading firm, according to a recent 10%. news story. She is typical of the Chinese Many of those rich Chinese emigrants buyers who have rescued many Austral- are coming to Australia. China sent more ian developers, agents and vendors from immigrants to Australia in 2010 than any deeper price cuts and longer selling times other country, including the UK and New in recent years. Zealand. Even as they sink roots into Australia, Qa unit in a retirement village here in Australia . My foreign citizen parents want to move into rich Chinese like Sun are also keeping a presence in China. For example, pub- to be near our family. They won’t actually own the lished research shows that about 80% unit – they will have a ‘lifetime’ lease permitting plan to keep their Chinese passports. them to live in the unit. Will they need approval? It is common for the wife and child to live Yes, they will need approval for the acquisition of abroad, while the husband spends most of the lease (because the term of the lease is more than his time in China. Chinese émigrés might five years). still run businesses in China. They are usually moving abroad for their children. They believe that Western Less than 12 months ago, the Chinese schools and universities are better than government got a shock when the results their Chinese counterparts, and that living of a comprehensive survey of high-net- overseas will give their children an advan- worth Chinese like Sun were released. tage in life. The two organizations behind the sur- Foreign residency could also be use- vey are very respectable, Bain & Co and ful in case China goes through policy China Merchants’ Bank, so the results shifts, like massive new wealth taxes or can’t be written off as a fluke. social unrest. China is a rapidly chang- The survey revealed what many Aus- ing country. Riots, strikes and protests tralian agents had already been feeling: recently doubled over the last five years rich Chinese, for various reasons, want to to 180,000. get out of China, and they believe buying Emigration and educating children are property in Australia and other countries just two of the reasons wealthy Chinese enables their escape. are buying property in Australia. The third Not just a few rich Chinese want out. is for investment. A full 57% of rich Chinese have con- As Sun puts it, Australia’s “legal system templated emigration. About 20% have is better”. She plans to migrate to Australia actually completed immigration proce- to live in one of her new homes. She will dures in countries like Australia or expect find renters for the other two.17 www.propertyobserver.com.au
  18. 18. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON HOW TO UNDERSTAND CHINESE BUYERS: ANDREW TAYLOR (CONTINUED) Australian property is an attractive investment in its own right, with credible economists predicting prices will be 55% Qperson and I want I am a foreign . higher in 10 years. to buy a transportable It also represents a diversification of home in a caravan risk. Instead of only investing in property park. Even though I in China, they put some of their money won’t be acquiring overseas so they don’t lose everything if any land with this the Chinese property market goes down. proposal, do I need Buyers like Sun have made a real approval? impact on the Australian property market. You will need As one agent told the Sydney Morning approval if you enter Herald about Chinese buyers, “They’re a lease for the site in the only ones that have got the big dollars the caravan park for a at the moment”. period in excess of five The Financial Times has reported that years. Chinese buyers account for 20% of all purchases in Sydney. This may be an overestimate, but it reflects the trend. Chinese buyers enabled the company to They tend to seek out property that has keep up production rates in Melbourne water views or is close to the ocean or and Sydney through the GFC. major universities and CBDs. “We build between 1,300 to 1,500 new Many developers depend on Chinese apartments each year in NSW and south- buyers for their off-the-plan unit sales. east Queensland,” Spira says. Chinese parents often buy Australian Schwartz reckons, “You are not doing a apartments for their children to live in good job at selling real estate in Australia while studying. today if you’re not marketing to the Chi- At the Stamford Residences, a 30-level nese buyer”. tower at The Rocks in Sydney, one buyer Chinese buyers also make their mark recently bought a $2 million apartment on the higher end of the market. Just to serve as this sort of student housing. this month, a luxury penthouse at Lumi- Mainland Chinese buyers snapped up ere Residences in the Sydney CBD was about six of the building’s 122 apartments. reported sold for $8.1 million to an Asian, In Melbourne, developer Morry possibly Chinese, investor. Schwartz of PanUrban says, “Chinese But, while new developments and lux- buyers, both local and from Asia, account ury properties grab the headlines, the for about 60% of enquiries and purchases overwhelming interest I see is from Chi- at Pan Urban’s developments. That’s up nese buyers enquiring about affordable substantially from a few years ago.” second-hand property in good locations. Meriton general manager Peter Spira ANDREW TAYLOR, told the Australian Financial Review that FOUNDER, JUWAI.COM18 www.propertyobserver.com.au
  19. 19. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON ASIAN BUYERS VITAL TO AUSTRALIAN PROPERTY MARKET: MORRY SCHWARTZ A sian buyers are vital to the success developers in the US, Australia, Canada, of future residential developments the United Kingdom and Japan. and developers must engage Schwartz says there a “huge need” for with them, says Morry Schwartz, head of such a site. Melbourne-based property developer Pan “Australian agents are looking for buy- Urban. ers, and Chinese buyers want to spend Speaking to Property Observer, billions on Australian property. But getting Schwartz says Chinese buyers from coun- the two groups together before Juwai cost tries like Malaysia and Indonesia see a a fortune. country like Australia as a safe haven for “Agents had to travel to China for prop- the long term. erty expos, hire Mandarin-speaking staff “Sometimes Chinese people who are or to split their commissions with Chinese living in Malaysia or Indonesia feel slightly agents — none of which is affordable in insecure about buying where they live this marketplace.” because there may be anti-Chinese senti- Taken as a group, local and offshore ment in those countries,” he says. Asian buyers currently account for about Schwartz also believes Australia offers 60% of enquiries and purchases at Pan a more stable investment option than Urban’s developments – “up substantially mainland China. from a few years ago,” Schwartz says. “In mainland China there is a strange political combination of capitalism in a socialist environment, not necessarily the most stable. Qresident and my I’m a foreign non- . “People, who have wealth – some of spouse is an Australian them great wealth – worry about national- permanent resident. If ism,” he says. we’re buying a house Furthermore, while Australian investors together, do I require tend to be more insular in nature and are approval? not inclined to buy an apartment in Hong Yes. Even though Kong, Schwartz says Asian buyers don’t your spouse doesn’t think it’s strange to buy in countries like require approval, Australia or Canada. you are still required “And there is the education factor. Par- to seek foreign ents like to buy an apartment for their child investment approval who is studying at RMIT,” he says. and submit an His comments following the launch application. Approval of Juwai.com, promoted as the world’s will be granted largest international property search and according to the information platform for Mandarin-speak- relevant eligibility ing Chinese consumers. criteria. The site has more than 1 million prop- erty listings from over 80,000 agents and19 www.propertyobserver.com.au
  20. 20. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON AZURE DEVELOPMENT DRAWS CHINESE INTEREST square metres and start at $480,000, and two-bedroom apartments range from 82 square metres to 107 square metres and start from $638,000. Three-bedroom apartments start at 134 square metres and $998,000, and three-bedroom town- houses range from 127 square metres to 136 square metres and are priced from $1.23 million. The project’s property manager esti- mates that about 40% of attendees at open for inspections have been prospec- tive Chinese owner-occupiers, with about 5% Chinese investors. Of the about 100 A sold so far, about 35% have sold to Chi- zure, a new development by nese owner-occupiers and 5% to Chinese CBRE and BridgeHill in the investors. Sydney suburb of Rhodes, is Azure is being advertised in Chinese attracting interest from Chinese buyers, Herald Property Weekly and Chinese primarily owner-occupiers. Sydney Property Weekly in order to target The waterfront development will feature this market. 169 studio, one-, two- and three-bedroom The interiors were designed by award- apartments and three-bedroom town- winning SJB Architects, and the units houses across four waterfront buildings. surround a garden square. Studio apartments start from 40 square Construction began in early 2011 and is metres and $385,000, one-bedrooms expected to be finished in September or range from 54 square metres to 67 October this year.20 www.propertyobserver.com.au
  21. 21. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON CHINESE INVESTMENT IMPORTANT FOR AUSTRALIAN PROPERTY: TED BAILLIEU V ictorian Premier Ted Baillieu has 121-hectare Shoalhaven River island, for moved to allay fears about the about $2.5 million. impact of increasing Chinese In August 2011 Baillieu unveiled a strat- investment in Australia as he embarked egy of Victoria increasing the promotion of on a trip of China in September. its agricultural, manufacturing and finan- He says the Foreign Investment Review cial services in China. Board is protecting “strategic interests”. Bailleu says Chinese investment should “Obviously the investment review board be welcomed as it will help farmers sell is in charge of these issues. Suffice to say their products in the second biggest and work is being done so that we can keep an fastest growing economy in the world. eye on our strategic interests, and I think “I don’t think we should be shy in any that is a good thing,” Bailleu says. way ... about investment in Victoria,” he Approved Chinese investments in Aus- says. tralia have totalled an estimated $60 billion In a speech at the Australia-China since late 2007, including the purchase of Business Week forum in August, former farms, wineries and office towers. premier of Victoria John Brumby said This year, Chinese investment firms China’s investment in Australia must be have continued buying up both rural prop- viewed as an opportunity, not a threat. erties and offices. “The Australia-China Business Council Recent transactions include Chinese has shown that trade with China generated conglomerate HNA Group purchasing the the equivalent of $10,000 per Australian 1 York Street office tower in the Sydney household in the past year alone. So this CBD for $117 million from Colonial First is, by any measure, an important relation- State. ship,” Brumby said. Chinese investors also bought the Capercallie vineyard in the NSW Hunter Valley for about $2 million, and another Chinese group bought Burraga Island, a Qapproval. Can I still submit an application for I have been told that the developer has pre- . individual approval? No. The FIRB does not issue individual exemption or approval letters if approval is not required. The developer must provide you with a copy of the pre-approval letter, which you should keep with your records. You should only apply for individual approval if the developer’s pre-approval is not valid – for example, if the dwelling is no longer new, or if you are not purchasing it from the developer named in the pre-approval letter.21 www.propertyobserver.com.au
  22. 22. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON POINT PIPER ON THE CHINESE TOURIST ROUTE FOR INSIGHT INTO THE PRIVILEGED LIVES OF COMMUNIST PARTY PRINCELINGS T here’s apparently a new addition correct order) businessman Zeng Wei, for sightseeing Chinese tourists and his wife, Jiang Mei, were examples of when they visit Sydney. the opportunities open to foreign investors Not just cuddly koalas and the Opera in the right visa class. House – they have added driving along “Mr Wei’s father, Zeng Qinghong, was Wolseley Road, Point Piper for a glimpse vice-president of China between 2003 and of the $32.4 million property owned by a 2008 and the fifth-ranking member in the son of a former vice-president of China, Politburo Standing Committee,” the SMH according to a Wall Street Journal report. and The Age report noted. Set high on a hill, above a towering “In 2008, the couple paid $32.4 mil- Architect’s impression: Gergely & Pinter sandstone wall and overlooking Sydney lion for Craig-y-Mor in Point Piper, theArchitects Harbour with picture postcard-perfect third-most expensive house ever sold in views of the bridge, Craig-y-Mor, the Point Australia. The purchase was made after Piper non-waterfront residence, is owned he obtained a business migration visa the by Zeng Wei and his wife, Jiang Mei. year before. The 2008 purchase was made just in “The grand 1920s house with renova- the name of Jiang Mei. Quietly during tions by Professor Leslie Wilkinson was 2009, the name of the Zeng Weo was sub- initially bought just in his wife’s name, as sequently added to the title. was an earlier acquisition - a $1 million By late 2009 the couple were seeking its apartment in the World Tower block in Liv- demolition, to be replaced by a $5 million erpool Street in the CBD in 2005. new home (architect’s impression at left), “The couple’s application to demolish so they were both named for the first time the house and replace it with a new $4.95 in the much-anticipated end-of-year Syd- million home is being reviewed by Wool- ney Morning Herald Title Deeds Christmas lahra Council, which is seeking heritage party column. It quickly sparked specula- advice,” the newspaper reported in an tion in Chinese internet chatrooms. article by then property editors Jonathan Despite their names being published Chancellor and Marika Dobbin. in an incorrect order and the restrictions The couple won planning approval on on Baidu, the Chinese internet search Christmas Eve 2010. engine, the web was soon alive with They currently have lodged an amend- chatter linking Wei to his father, Zeng ment seeking modifications for an extra Qinghong, the former vice-president of tunnel excavation, this one to provide the People’s Republic of China between access to the pool and gym area. 2003 and 2008, and once one of the most The WSJ noted the elder Zeng, long powerful men in the Chinese Communist the right-hand man to former president Party. Jiang was noted for studying at the Jiang Zemin, was a member of China’s Beijing Dance Academy and, following a peak political body, the Politburo Standing stint in television, at the Chinese property Committee, for five years and before that developer Renhe Group. headed the powerful Organisation Depart- In April 2010, the Fairfax press pub- ment, which is responsible for deciding lished confirmatory details noting (in who gets which political posts.22 www.propertyobserver.com.au
  23. 23. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON SINGAPOREAN INVESTORS BUYING OFF THE PLAN IN PERTH S ingaporean investors have spent more than $11 million buying apartments off the plan in Fraser’s new residential project in Perth. The development known as QIII is part of Frasers’ Queens Riverside Hotel + Res- idences development, which will offer 408 luxury apartments in three buildings and a 236-room all-suites hotel operated under the Frasers Hospitality brand. Frasers ran a series of seminars in Sin- gapore in November promoting the project to local buyers and attracted “exceptional interest” as well as sales of $11.1 million, according to CEO Guy Pahor. The 26-storey apartment building will feature 265 apartments, of which 125 have been sold. Many of the Singaporean QIII will be the second stage of the buyers purchased with the intention of development, which is being built for upgrading from their existing Perth proper- Frasers by Diploma Construction. The ties as the time draws closer to completion first stage, the $107.5 million construc- of QIII. tion of Fraser Suites Perth plus common Apartments are selling for about basements and podium for the Queens $730,000, with $1.4 million the top price Riverside precinct, is now underway. achieved to date. It was for a three-bed- Construction of QIII will commence in room apartment on the 21st floor. early 2012 and finish in January 2014.23 www.propertyobserver.com.au
  24. 24. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON APARTMENT PRICES COULD FALL IF CHINESE BUYERS PULL BACK: ROBERT GOTTLIEBSEN Chinese buyers were buying Australian Q. I did not know I apartments as part of efforts to have some needed approval and of their funds outside of China “as a risk have already entered hedge”. an unconditional “But there are now much greater liquid- contract to purchase ity pressures at home, and those that property – does that bought when the dollar was around $1.08 mean my contract is are showing a 10% loss. invalid? “At the moment, there are a great many No, the contract apartment towers being built in Sydney remains valid, but and to a lesser extent Melbourne, where by entering an the mainland Chinese have bought off the plan, usually with a 10% deposit.” unconditional contract “Australia’s largest apartment devel- you have breached oper, Harry Triguboff, has confirmed that the FATA. You should Chinese buying of inner-Sydney apart- submit a retrospective ments has halved in the last month. The application. If you China squeeze on its property market and meet the eligibility fears about the level of our dollar are now criteria, retrospective having a direct effect on the Australian approval is generally dwelling market,” he says. granted (that is, no “Triguboff believes that the sharp cut- action will be taken back in Chinese apartment demand will with respect to the probably reduce apartment prices in Syd- breach as long as ney by about 10%, but the prices will not you comply with the collapse. He believes that a fall in apart- standard conditions). ment prices will flow on to the whole dwelling market in Sydney.” Liquidity pressures back home and a “Triguboff says so far all Chinese buyers weaker Australian dollar could cause Chi- have honoured their agreements but no nese buyers of off-the-plan apartments in one can be sure which way the Chinese Sydney and Melbourne to withdraw their will jump if the global crisis intensifies. If offers, Business Spectator’s Robert Got- they failed to honour their agreements, tliebsen warned in November 2011. then apartment prices would almost cer- Gottliebsen says mainland Chinese tainly fall by more than 10%. investors have been the primary buyers “The Chinese apartment pullback and of Sydney apartments in recent times, the European bank withdrawal plus the investing about $2 billion a year in Syd- truly astounding events in Europe – where ney. He says they are also major buyers in (in the words of Westpac’s London man Melbourne, taking their annual investment James Shugg) the world is watching a rate to about $3 billion. train wreck taking place in slow motion – Before the global deterioration, he says is going to intensify the pressures on the24 www.propertyobserver.com.au
  25. 25. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON APARTMENT PRICES COULD FALL IF CHINESE BUYERS PULL BACK: ROBERT GOTTLIEBSEN (CONTINUED) Reserve Bank to reduce interest rates a “If Australians can’t get bank finance lot further. to buy apartments and the Chinese with- We are not on the front line, but the drawal intensifies, then we will see even missiles have reached our shores,” says greater pressure on dwelling prices. This Gottliebsen. is not a forecast, but when banks push While Chinese buyers have started pull- prices up via their lending policies and ing back, Gottliebsen says lower interest then push them down with different poli- rates and the lift in rents has started to cies, then they have only themselves to rekindle Australian interest in apartments, blame for any losses,” Gottliebsen says. which will be helped by the lower prices. “Of course, in the apartment market He highlights Triguboff’s fear the Aus- local councils and state governments tralian banks may be on the way to have taken actions that have increased “engineering their own train crash, albeit the price of apartments by about 15%. nothing anywhere near as serious as the “If the councils and other bodies made European disaster”. the rules for approvals straightforward and “Australian banks – having been the made their building requirements fit into main driver of higher house and, to some economic construction methods and mar- extent, apartment prices – are once again ket demand, then apartment costs would lowering the values of dwellings in deter- fall,” he says. mining how much they will lend. While the This would enable Australians to buy Chinese were buying apartments that did them, but might affect the values of exist- not matter, although it has contributed to ing apartments. a large number of unsold houses in most There will be many twists in this tale, capitals. some of them rather unpleasant.” Qinvestment approval when I boughtfor foreign I was unaware of the requirement . some land about six months ago to build a house and recently a friend told me that I may have breached the requirements because I should have obtained approval prior to purchasing the property. What action will the government take against me now? Action will depend on whether your acquisition would have been approvable under the current guidelines. Worst case scenario: where it is considered inconsistent with policy you may be ordered to sell the land within a certain time. Provided you sell within the required time, prosecution is unlikely though details of the breach will be sent to the immigration authorities for any action they deem necessary.25 www.propertyobserver.com.au
  26. 26. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON UNDERSTANDING THE FOREIGN INVESTMENT REVIEW BOARD T he Australian government seeks to ensure that foreign investment in residential real estate increases the supply of dwellings and is not speculative in nature. Residential real estate means all Australian residential land and housing other than commercial properties (such as, offices, factories, warehouses, hotels, restaurants and shops) and rural properties (that is, land that is used wholly and exclusively for carrying on a substantial business of primary production). Foreign persons are prohibited from acquiring established dwellings for investment purposes, including holiday homes, irrespective of whether they are temporary residents in Australia. However, temporary residents can apply to buy one established dwelling to use as their residence in Australia. Approval is usually provided subject to a condition that the temporary resident sells the dwelling when it ceases to be their residence. If you are applying to purchase residential real estate, you can submit an application through the online system. Certain acquisitions do not require notification or approval under the Foreign Acquisitions and Takeovers Act 1975. New dwellings acquired off the plan are normally approved where the dwellings have not previously been sold. There are no restrictions on the number of such dwellings in a new development that may be sold to foreign persons, provided that the developer markets the dwellings locally as well as overseas (that is, the dwellings cannot be marketed exclusively overseas). A property purchased under this category may be rented out, sold to Australian interests or other eligible purchasers, or retained for the foreign investor’s own use. Once the property has been purchased, it is second-hand real estate and is subject to the restrictions applying to that category.26 www.propertyobserver.com.au
  27. 27. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON UNDERSTANDING THE FOREIGN INVESTMENT REVIEW BOARD (CONTINUED) Foreign persons should determine whether their proposed acquisition is exempt and if in doubt, seek legal advice. You do not need to submit an application for approval to acquire real estate in Australia if: • you are an Australian citizen living abroad; • your spouse is an Australian citizen (not a permanent resident) and you are purchasing residential real estate in both names as joint tenants (not tenants in common); • you hold a permanent resident visa and you are purchasing residential property; • you are purchasing new dwelling(s) from the developer, where the developer has pre-approval to sell those dwellings to foreign persons; • you are acquiring an interest in developed commercial property where the property is to be used immediately and in its present state for industrial or non residential commercial purposes; • you are acquiring an interest by will or by operation of law (such as, a court order regarding the division of property in a divorce settlement, but not if both parties simply agree to transfer property without a court’s intervention); or • you are purchasing property from the government. Source: Foreign Investment Review Board P roperty Observer readers who wish to ask more specific questions should do so via: The Foreign Investment Review Board C/- The Treasury Langton Crescent Parkes ACT 2600, Australia Telephone Inquiries +61 2 6263 3795 (9:00 am – 12:30 pm and 1:30 pm – 5:00 pm AEST, Monday to Friday, excluding public holidays) Email: firbenquiries@treasury.gov.au27 www.propertyobserver.com.au
  28. 28. WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON CHINESE APPETITE FOR GOLD COAST PROPERTY SOARS TO RECORD HIGHS: COLLIERS C hinese buyers accounted for nearly a third of foreign purchases Q. Can you give of Queensland residential real me an example of a estate during the 2010-11 financial year, ‘condition’ to include with record amounts spent on Gold Coast in the contract? property, according to research compiled ‘This contract is by Colliers International. subject to foreign The Gold Coast was China’s preferred investment approval. local authority during the 2010-11 year, If such approval is and they spent a total of $66.9 million not obtained within (40% of the total amount spent by for- 40 days, this contract eigners) in the area. This was followed is terminated and all by Brisbane with $30.4 million and Logan monies deposited will with $4.8 million. be refunded.’ Gold Coast figures for 2010-11 were 128% higher than the previous year, when Furthermore, with two expanding inter- Chinese buyers spent $29.3 million – the national airports – Brisbane and the Gold largest amount spent by Chinese buyers Coast – close by, it is easily accessible in a single year since Colliers began to both domestically and internationally. monitor foreign investment figures. In December 2011, China Southern air- line announced it would launch up to four direct flights a week between Coolangatta and the Chinese city hub of Guangzhou by 2015. “Within five years China is expected to eclipse New Zealand as the Gold Coast’s number-one tourism provider,” Holland says. “With continued strong tourism, the popularity of the Gold Coast with foreign buyers is encouraging and, with the cur- rent stock of new apartments now down to a 10-year low, these figures should provide developers with confidence to commence new projects over the coming 12 months,” he says. Tony Holland, Colliers International While overall foreign investment in the Gold Coast director of project marketing, Queensland has declined since the GFC says the Gold Coast is a favoured desti- (the 2007-2008 financial year), Chinese nation for Chinese and other foreigners buyers have not been deterred, spending because of its year-round sunshine and almost $107 million in the state’s property attractive lifestyle opportunities.28 www.propertyobserver.com.au

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