Chinese investors have looked to Australia now for a number of years. They have focused on agriculture, mining and real estate and the property development market seems to remain one area which has seen a huge increase in investment. In fact, it has been reported that the investment figure by Chinese real estate companies has jumped from about $6billiion in 2012-13 up to $24billion by 2014-15. In just two years that’s an enormous increase and shows that there is still scope to find healthy returns. Whilst there are many reports dismissing the Chinese development, as they speculate that it will begin to slow rapidly and that local Australian developers are losing out to foreign investors, at this present time it still maintains its popularity. But why? Why has Australia become such a highly sought location for Chinese property development?
Domestic Market Has Slowed
Whilst China has experienced one of the fastest growth rates and seen some of the most extensive development of any country in history its own market is starting to saturate and slow down. Some of the smaller cities have seen a glut of properties without the necessary demand to fulfil them. As there has been an enormous migration to the major cities so there has been a lack of demand for property development outside of them. In the larger cities such as Beijing and Shanghai the prices remain very high and so returns are very low. This has led to Chinese investors looking internationally for locations which will provide them with higher returns.
Chinese Buyer Demand
Whilst the Chinese economy has taken a minor downturn, its previous successes have led to a lot of people with wealth who are looking for properties to purchase abroad both as investments and secondary homes. Having such a large number of potential customers allows property developers to undertake projects confident in the knowledge that they have genuine interest. Some Chinese people have even started to lose money on their properties particularly those based outside of the largest cities and so they need to find a way to halt this slide. Australia is a particularly attractive location to Chinese buyers as the prices and potential returns are favourable but also there is a large number of Chinese already living in Australia and so the local communities attract more inward migration.
State Owned Land
One of the big differences between purchasing property in China as opposed to other countries is that in China much of the land belongs to the state. Properties are leased through land grants but these will expire after a number of years. Once this happens it can be a bit of an unknown as to what will come of the lease and renewals can regularly increase in rates. This lack of assurance of future contracts has led real estate firms to look abroad.
As well as the above factors the land is generally always cheaper in Australia when compared to the major Chinese cities. Places such as Sydney and Melbourne have seen widespread development by Chinese developers. Projects such as commercial office and malls are usually top of the list as they will generate high returns, are in demand and are cheaper to build than in China. The shopping mall market is a particularly attractive one as new developments are continually planned to cope with the changing shopping habits in society.