The overall tone of the conference was “cautiously optimistic” with strong current and forward-looking fundamentals, but obvious caution on external systemic forces and the global economic backdrop.
Following is a summary of the themes and their potential impact on the Australian Property market.
David Chin, event organiser spoke on the Chinese mindset and their impact on the Australian Property market
- Chinese investment interest remains high with little alternatives for Chinese nationals to invest in.
- Ongoing currency (CNY) weakness, superior Australian lifestyle and possible future migration will also be determining factors
- Significantly growing Chinese middle class, with HNW individuals growing 10-15%/yr. 1million HNW in China vs 200,000 in Australia
- Tourism and student education to remain a powerful influence
- Australian banking exposure to Chinese investors is only 1-3% of their books.
The first-panel discussion included several GM’s/CEO’s of Chinese Developers in Australia
- The election remains a key uncertainty with due diligence on any possible development site on hold until after the election
- Despite the legislation stating that up to 100% of all stock can now be sold offshore, delegates commented only 20-30% of the stock is being sold this way with the rest being sold domestically.
- The supply/demand balance of apartments in Australia still looks good
- They are aware of upcoming possible settlement risk but are preparing for this possible event.
The second-panel discussion consisted of the heads of three Property Fund Management firms in Australia
- Chinese fund managers are underweight property globally. They are allowed to have up to 15% allocation, currently ~2%
- Goldfields House redevelopment in Sydney will see apartments sell at $40,000/sqm which will set a new luxury standard price in the city
- Second tier developers are the one’s who are starting to feel some pain after they paid too much for sites, running into higher building costs, and banks pulling back for funding on specific projects
- Most interestingly, they see the best opportunities in the market are; Hotels, childcare, aged care and mixed-use development. House and land packages are surprisingly still viewed as a great opportunity also, with both Sydney & Melbourne seeing population growth at >100,000 people per year.
The last panel spoke about “development issues in Australia for foreign developers”
- The integrity of brand name being paramount for those foreign developers in Australia. Many see a long-term future here
- Chinese buyers, like Australian buyers, look for a quality builder and are in the business of trying to make money, and thus paying the right price is important.
The most interesting influencer on this last panel was Esther Yong, the founder of AC Property. They market off-the-plan properties for sale in Australia to Chinese buyers. The website provides valuable data on Chinese buyers and their tastes through their online activity. Esther also highlighted that with tighter restrictions on foreign lending for residential property, many clients were asking about Australian commercial property.
This was the second annual Aus-China property conference held by BasisPoint. David Chin is the founder of Basis Point which provides business intelligence and networking opportunities for participants in the investment and financial markets in Australia and Asia.
They cover three areas which are increasingly inter-related due to ‘China’s disruption’ as a major supplier of capital in global markets, and as a major trading partner with Australia:
- Significant Investor Visa and China’s HNW private investments in Australia
- Growing Australia-China property, agri and tourism development opportunities
- Funds and private capital sources including hedge funds, SMSFs, boutique funds, VC funds, proprietary trading /derivatives and Family Offices, especially with an Australia-China and Australia-Asia connection.