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Monday, 22 June 2015

Chinese investment in Australia

Chinese investment rotates to real estate

I read with interest this week that the office block at Sydney's 175 Liverpool was sold off to a Chinese property group.

As good a time as any, then, to have a quick look at some Chinese investment trends.

Doug Ferguson of KPMG and Professor Hans Hendrischke of the University of Sydney have teamed up with Knight Frank to produce an excellent and enlightening summary report on this very subject, entitled Demystifying China.

It's well worth a read. 

Below are just a few of their key findings.

Trend 1 - Commercial real estate investment quadruples

In 2014, Chinese overseas investment in Australia was largely focused on commercial real estate at 46 per cent of the total ($4.4 billion), with mining now accounting for just 11 per cent $992 million)

Chinese investment in commercial real estate nearly quadrupled in only one year to $4.37 billion.

A few of the larger investments in 2014 included the Hoyts Group, the Port of Newcastle, the Sheraton on the Park and the flagship Gold Field House at Sydney's 1 Albert.

These trends are only set to continue as the threshold for outbound investment was raised tenfold from US$100 million to US$1 billion in October.

Incredibly, the report notes that the total assets of China's insurance industry doubled in the past 5 years to RMB 9.6 trillion (US$ 1.6 trillion).

Investment is now rotating away from mining and resources and into real estate.

This stunning graphic puts into context just how serious Chinese investment is in the "gateway cities" of Sydney and Melbourne.

Not that these figures exclude residential property. 

The report found that Brisbane and the Gold Coast are beginning to capture more Chinese residential developer interest, in particular around Brisbane's Newstead and Fortitude Valley (I live there, and yes that is definitely the case).

Here is a list of some of the key properties bought by Chinese investors in the 15 months to March 2015.

The trend is only set to continue, if not accelerate.

Trend 2 - Currency play

Purchasing power for Chinese capital against the Australian dollar has increased massively over the past decade, which only encourages further investment.

Trend 3 - A New South Wales focus

It is interesting to note that a massive 72 per cent of Chinese investment hits New South Wales.

Australia is encouraging further Chinese investment with the Significant Investor Visa (SIV, A$ 5 million) now being refined with a Premium Investor Visa (PIV, $15 million) offering a more expeditious route to Australian permanent residency within 12 months for ultra-high net worth individuals.

Read the rest of the excellent report here.