According to Cushman & Wakefield, Australia’s commercial real estate industry will be on track despite the lowering of Chinese investments. This is after last week’s report regarding China putting the brakes to overseas investment by Chinese companies.
China’s State Council has placed overseas property development and hotels on a “restricted” classification. The move is in accordance with the government’s expressed concerns in reducing risks to Chinese businesses, especially to their country’s banking sector.
Quoting James Quigley, “in the first half of 2017, the largest source of foreign capital for Australian commercial real estate was from investors from Singapore, while Hong Kong investors were responsible for recent landmark deals in Australia and London.”
In addition, “These included 20 Bond Street in Sydney and the record £1.15 billion purchase of London’s Leadenhall Building, known as the ‘Cheesegrater’.”
“Despite the decline in investment from mainland Chinese, Australian property investment volumes are on track for another robust year supported by investors from Singapore, Hong Kong, the US, and Germany as well as local institutions such as Dexus and Charter Hall.” said the head of capital Markets, Australia and New Zealand for Cushman & Wakefield.
He also said that the lack of Chinese investment activity in Australia is interesting given Sydney ranked as the most preferred real estate destination in a recent Asian investment survey.
The national director of research at Cushman & Wakefield, John Sears said that there are various reasons for the decline. This includes but is not limited to available assets and some lumpy investments in 2016. The decline mainly hit development sites and hotels dropping the investments in almost 85 and 67 per cent respectively. He also noted that there is a potential impact if China further drops it investments on Australia’s commercial real estate market.
“While new capital guidelines for mainland Chinese investors will mean more controlled investment, overall volumes are expected to remain firm and demand for Australian commercial real estate remain robust supported by an inquiry from a variety of global sources including Singapore and Hong Kong,” he said.
He also pointed that the drivers of lower investment are also a range of other local factors, particularly relating to residential development.
“Changing market conditions, over development in some areas and efforts by Australian authorities to dampen the residential market may have contributed to the decline by Chinese investors in development sites,” said Cheng.
Sears emphasized that it was important to note that the Chinese government is not banning outright overseas real estate and hotel investments and some sectors.