Chinese developers surge back into Melbourne

January 20, 2017

Chinese developers roared back into Melbourne in the final five months of 2016, snapping up three-quarters of development sites as they shrugged off concerns about apartment oversupply, tougher planning rules and higher property taxes.

Real estate agent CBRE said 75 per cent of the 45 Melbourne development sites they transacted between August and December were sold to mainland Chinese buyers.

This compared with less than one in five sales to Chinese groups in the first seven months of the year as Chinese government capital control measures and uncertainty about the federal election in Australia affected appetite.

“We’ve sold more properties to Chinese buyers in the past five months than in any other five-month period since 2009,” said CBRE national director Mark Wizel.

The Australian Financial Review calculated that there has been more than $730 million worth of Melbourne development site sales to Chinese developers since August. These included acquisitions by Dahua and Poly, and new entrants like Nuway Wy, which paid $97 million for the former Melbourne convention centre site with a permit for 1000 apartments.

Mr Wizel said that relative affordability was one reason why Melbourne appetite had rebounded so strongly following a period of consolidation. “The convention centre site would have sold for $400 million were it in Sydney,” he said.

“Chinese developers see a lot of value in Melbourne and they are willing to accept a lower return because they can save money in other ways, such as by selling apartments directly into China and avoiding paying local estate agent commission fees.

“They also have a better read on demand from China for housing than we have. They wouldn’t buy these sites if they didn’t have the end buyers,” Mr Wizel said.

Jiaheng Chan, managing director of Malaysian-backed developer Beulah International, which has just launched a new apartment project in Ivanhoe, said Melbourne appealed for all the reasons it was named the most liveable city in the world for six consecutive years.

Kings Tower on the corner of King and Little Lonsdale streets will have 430 apartments.

“A major drawcard for Melbourne is the education system and the quality of schools and universities on offer, so we’re drawn to develop near educational hubs where there is strong demand for more dwellings,” he said.

Danny Shi, who heads up CBRE’s Asian services desk, said Sydney had also benefited from the resurgence of Asian buyers seen in Melbourne, after the July federal election.

“The uncertainty around the election result combined with the new FIRB fees and the new stamp duty taxes all created reluctance among Chinese buyers. But this changed, once the new government settled in and developers got their head around the new rules and tax changes,” he said.

Sydney sales in the latter half of the year saw ASX-listed Chinese developer Boyuan paying $70 million for a 40.5-hectare land parcel in western Sydney with capacity for 600 housing lots and Chinese-backed JQZ buying the former Darrell Lea factory in Sydney’s south with plans for more than 500 apartments.A new hotel will rise at 250 Sturt Street, Southbank, Melbourne.

“The last quarter was the busiest of the year for me,” Mr Shi said. “I think about 95 per cent of my deals were to Chinese investors.”

But, he said, in a cooler market Chinese developers were paying less attention to second-tier cities like Brisbane and Adelaide.

Mr Wizel said he expected a rise in activity in 2017 from some of the big Chinese developers such as Greenland, Fosun, Vanke, Wanda and R&F, who were relatively inactive in 2016.

He noted that Chinese groups were also expanding their activities beyond development sites. “We’re now seeing more interest in hotels, shopping centres, office buildings and leisure properties,” he said.