Real estate investors from China are turning their attention to new locations in Australia.
Sydney and Melbourne have been the main focus of Chinese attention, helping to drive commercial real estate real as as well as new and off the plan residential property prices higher.
But the impetus will not come from traditional property developers, rather its insurance companies.
The next wave of Chinese capital flowing into Australian property will target new destinations like Brisbane, Gold Coast, Adelaide, Perth and the suburbs of Sydney and Melbourne, according to Knight Frank’s report, Chinese Outward Real Estate Investment Globally and Into Australia.
According to Knight Frank , the total value of Chinese outward real estate investment globally skyrocketed from US$0.6 billion in 2009 to US$16.9 billion in 2014 across the world.
Offshore investments help Chinese investors diversify risk into markets which offer better returns and lower funding costs.
Federal Government changes to foreign investment rules for private homes are unlikely to deter the large scale development and investment into commercial and residential markets.
Similarly the report, Demystifying Chinese Investment in Australia, by KPMG Australia, the University of Sydney Business School and China Studies Centre, shows a switch in focus.
“Chinese high net worth investors and developers are looking to new destinations offering discounts on prime property such as Miami in the US, and in Australia, Brisbane, Gold Coast, Adelaide and regional suburbs of NSW and Victoria will start to gain more traction,” the report says.
“In the commercial sector, retail and hotels will start to garner more interest following relatively subdued activity over the past few years by comparison to residential development sites.”“The quality of life, weather, clean air and world class education institutions all act as a magnet to Chinese developers and migrants alike,” the report says.
“For many wealthy Chinese, the risk of buying property in unfamiliar overseas markets such as Australia can be offset by buying projects offered by Chinese developers.”
“This provides a sense of both familiarity and pride. However, our recent conversations with several pioneering Chinese developers revealed that they are increasingly realising the need not just to cater for Chinese buyers, but to tailor project design elements and marketing strategies to the broader local markets.”
In 2014, Chinese direct investment in Australia was mainly focused on commercial real estate (46%, up from 14% in 2013), infrastructure (21%) and for the first time, a material investment in the tourism and leisure sectors (12%).
According to the report, Chinese investment volume in commercial real estate nearly quadrupled to $4.37 billion over the 12 months.