One-third of Australian development site sales in 2017 to Chinese

One-third of Australian residential development site in 2017 were purchased by Chinese investors and developers, equating to AUD$2.02 billion of site sales, according to Knight Frank.

Their report, Chinese Developers in Australia – Market Insight 2018 found Chinese developers continued to dominate foreign investment in residential development sites across Australia.

"Many are now well-established in the local market," Knight Frank’s head of residential research, Australia Michelle Ciesielski said.

The share of sales to Chinese buyers has tripled since 2013, but decreased from the 38 per cent recorded in 2016.” (See Figure 1)

“Sustained developer interest in the Australian market has come in spite of government efforts in both Australia and China to tighten credit conditions as they relate to residential investment and development.

“In Australia, the Australian Prudential Regulatory Authority (APRA) has encouraged local financial institutions to impose stricter controls, while in China the government has attempted to moderate capital outflow with China’s Central Bank imposing new rules for companies which make yuan-denominated loans to overseas entities.

“However, in mid-2017, this was relaxed somewhat – resulting in a boost to market confidence.” said Ms Ciesielski. 

According to the report Victoria recorded the sale of 38.7 per cent of residential sites to Chinese buyers – the highest share of all states. 

Ms Ciesielski said many developers consider that Melbourne offers better relative value when compared to Sydney. New South Wales and Queensland followed, with Chinese buyers comprising 35.6% and 7.4% of their state’s total volumes, respectively.

Knight Frank’s Head of Asian Markets, Australia Dominic Ong said as Chinese developers gain experience in higher-density projects across the major cities, there has been diversification in many of their portfolios to include medium and lower-density sites.

“These lower-density projects have also become more popular with local developers – especially in NSW with the draft Medium Density Design Guide being released, identifying the ‘missing middle’ to encourage more low-rise, medium-density housing to be built.

“This type of project also tends to have less hurdles with the imposed tighter lending restrictions, and overall, lowers the delivery risk to the developer,” said Mr Ong.

The report found that residential development sites purchased by Chinese developers and investors in 2017 had an average site area of 21,785 square metres.

Of all Australian development sites purchased by Chinese developers and investors, 29 per cent were suited to low density (single dwellings or landed properties) – up from two per cent in 2013.