Foreign Investment In Australian Property Year Of The Dragon

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WHAT’S SET TO UNFOLD IN THE YEAR OF THE DRAGON

FOREIGN INVESTMENT IN AUSTRALIAN PROPERTY MARKETS

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FOREIGN INVESTMENT IN AUSTRALIAN PROPERTY MARKETS

A luxury waterfront home at Castle Cove on Sydney’s Middle Harbour sold for $6,066,000 last year. It

was certainly a strong sale price – and something of a give-away that the buyer’s origins were mainland China.

Asian buyers and investors are a key influence within some sectors of the Australian property market, defying the strong Australian dollar and underpinning demand for property.

Earlier this year Savills announced the sale of the luxury penthouse at Lumiere Residences Sydney for $8.1 million.

It went to a Thai buyer – another sale highlighting that Asian buyers continue to seek opportunities to acquire premium properties in Sydney’s central business district.

But proximity to the centre of town isn’t the only requirement for the Asian buying dollar. Being close to schools and uni-versities are key components of buying desires of Australians of Asian heritage and Australia-based Asian nationals.

There’s understandably been good buy-ing interest in the Central Park project at the Sydney CBD’s Broadway precinct given its proximity to top education institutions.

Launched in 2010, Central Park has not been formally marketed in Asia, but it is clear there is a strong, infor-mal referral network at work between Australia and China, Singapore and Indonesia.

It highlights the well-established cultural acceptance of apartment living within the Asian community – with this trend now extending from the CBD to other high-rise suburbs like Chatswood.

An interesting detail in the trend is that Chinese-Australian families are lead-ing the way with purchases of dual-key apartments because they suit inter-gen-erational living – with, say, an elderly relative or young university student living independently in a one-bedroom space, internally connected to the family’s larger apartment.

The good educational opportunities, its geographic proximity, the wealth of attractive assets, political stability and a predictable legal and banking environ-ment all make Australian an attractive destination for investment.

This eBook looks at recent times and envisages what could unfold in the Year of the Dragon.

JONATHAN CHANCELLOR, EDITOR, PROPERTY OBSERVER

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SYDNEY A ‘WORLD CLASS’ CITY AND A SAFE HAVEN FOR ASIAN INVESTORS

The inclusion of Sydney in Savills’ landmark World Class Index high-lights the city’s emerging standing

in the world of prestige international prop-erty, offering a safe haven for international investors, particularly from Asia.

The 2011 Savills report on the world’s 10 leading prestige property locations for international investors suggests Sydney is positioned to benefit from the both the “old” and “new” world economies it bridges.

Savills NSW research director Simon Hemphill believes Sydney is seen as a stable old-world investment choice with a well-established luxury housing market, while also in close proximity to the boom-ing new-world economies of Asia Pacific.

Luxury Sydney property also repre-sents very good value on the global stage, according to Savills, which ranks Sydney as the cheapest location for global billion-aires, while also offering the largest size of homes for the super-wealthy, at almost 1,900 square metres.

“Overall, Sydney still offers international investors great value and is extremely well-located to take advantage of Asian wealth if and when its policies restricting international buying are relaxed,” Hemp-hill says.

“Sydney is geographically very well placed to benefit from investment from frustrated Chinese and other Far Eastern investors, but they will need to open up their markets to such investors to trigger this,” according to Savills research.

“The city’s undersupply of accommoda-tion and high in-migration plus restrictions on new development, due to zoning and geography, are likely to keep prices the highest of any Australian city.”

Savills describes Sydney as beginning to display many of the common character-istics of the World Class city – constrained land supply, increasing pressure from overseas investors and high demand for prime accommodation – but it is unusual in offering very spacious living accom-modation in relation to other leading international investment locations.

“Asian interest in residential develop-ments within the Sydney metropolitan area is at an all-time high, with both Asian developers and private investors making substantial investments in the market,” Hemphill says.

“Anecdotally, almost a third of residen-tial projects in the Sydney metropolitan area currently under construction or being actively marketed are owned by Asian development companies.

“Private investors from Asia also make up a significant portion of buyers for inner-city residential developments, such as the Frasers Property Central Park develop-ment in Broadway, in the Sydney market. Indeed, circa 25% of purchases made so far in the Central Park development were by south-east Asian private investors. This trend is set to continue, given the nature and location of a number of developments currently mooted in and around Sydney.”

Q. I am a foreign person. Can I invest in property in Australia?

Yes, depending on what you wish to invest in.Acquisitions of residential real estate require prior

foreign investment approval before the purchase can proceed, though there are certain exemptions.

Certain acquisitions of commercial real estate also require prior foreign investment approval.

All Q&As sourced from the Foreign Investment Review Board

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CROWN GROUP SEEKS OUT ASIAN BUYERS FOR TOP RYDE PROJECT

Crown International Holdings Group enters the Year of the Dragon with ongoing projects

that will generate apartments with an end value of more than $2 billion.

Crown has also announced plans to set up a display pavilion in the heart of Syd-ney’s Chinatown later this year to better meet the needs of the Chinese community and visitors to Sydney.

Crown International Holdings chief Iwan Sunito says prospective buyers or investors will be invited to relax in very comfortable surrounds while they have the opportunity to converse with one of Crown’s international and multi-lingual sales consultants, who are fluent in a vari-ety of languages including Indonesian, Korean, Mandarin and Cantonese.

“The vibrant and dynamic display pavil-ion will provide locals and international visitors with detailed information about the various Crown projects, as well as being able to experience a display apartment,” Sunito says.

“Crown understands it’s important to provide all of our clients with detailed information for each of our developments, and we believe it’s important to provide this service in a person’s first language wherever possible.”

Crown Group’s signature Asian-inspired designs, which create private sanctuaries for residents to call home, continue to attract buyers from all around the world.

“Our properties are designed to incor-porate principles of feng shui and the architectural features display a fusion of Asian influences.

“At Top Ryde City Living for example, residents can get some quiet time at the meditation platform, sit and read a book in the beautifully landscaped gardens, swim a few laps of the pool or head to the gym for some exercise or yoga,” says Sunito.

Crown Group’s $500 million Top Ryde City Living project, one of Sydney’s larg-est residential property developments, is currently being pre-sold, and Crown has launched marketing initiatives in Jakarta, Indonesia in 2011, with further roll-outs in Shanghai, China and Singapore planned for 2012.

Top Ryde City Living has been pre-approved by the Australian Government’s Foreign Investment Review Board to accept non-Australian resident purchas-ers, so foreign investors are assured there is no approval process required or uncer-tainty in being allowed to purchase.

Crown offers foreign investors a 5% rental guarantee for one year.

“We have had a great response to the first release of Top Ryde Living City with approximately 90% already sold and only 26 apartments remaining for sale in stages 1 and 2, which range from $500,000 for a one-bedroom plus study with car space to $875,000 for a three-bedroom plus study and two car spaces,” Sunito says.

The next launch will be in March with the release of 135 apartments, says Kym Rogers, head of sales and marketing.

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FOREIGN DEVELOPERS GRAB 30% SHARE OF AUSTRALIAN APARTMENT MARKET: CBRE’S KEVIN STANLEY

In a major trend that mirrors current investment into the commercial real estate market, foreign-based companies

have moved firmly into the business of developing residential apartments across Australia. More than 13,000 apartments are presently either planned, being marketed or are under construction by foreign companies in 37 separate projects. Based on average apartment completions in Australia each year, this represents a market share as high as 32%.

SINGAPOREAN AND HONG KONG DEVELOPERS LEAD THE PACK

Asian developers account for 92% of all apartments presently being proposed or developed by foreign companies in Aus-tralia. The balance is split almost evenly between the USA, Canada and an as-yet-unknown country source. See Chart 1 for details. Developers from Singapore are proposing or building more apartments in Australia than devel-opers from any other foreign country at pre-sent, by a big margin.

Singaporean devel-opers are responsi ble for almost 5,000 apartments presently planned or underway, with 58% of these being facilitated by the globally active developer Frasers Property, and 65% of these in the Central Park project in Syd-ney.

The next most significant source of development capital is Hong Kong, with a single developer (Far East Consortium) behind 2,700 apartments in two Mel-bourne projects.

Q. How many properties can I

purchase?There are no

restrictions on the number of properties you are permitted to purchase, unless you are a temporary resident and want to acquire more than one established (second‑hand) dwelling as your principal place of residence.

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FOREIGN DEVELOPERS GRAB 30% SHARE OF AUSTRALIAN APARTMENT MARKET: KEVIN STANLEY (CONTINUED)

DEVELOPMENT IS WIDESPREAD

Apartments are being proposed or built by foreign developers in a wide range of locations across Australia and not just in the bigger capital cities. Chart 2 shows the num-ber of apartments by location.

The distribution tends to follow the size of the cities. The biggest mar-kets with the highest demand for apartments are Sydney and Mel-bourne, accounting for 79% of the total. Beyond this, though, foreign developers are facili-tating apartments in a wide range of locations, including the Gold Coast (10% of total), Brisbane (6%), Perth (3%) and Adelaide (2%).

In a surprising result, Melbourne has a greater number of apartments proposed by foreign developers than Sydney, despite being a city with 450,000 fewer people.

Location by submarket varies widely, as shown in Chart 3. Melbourne is expe-riencing the highest concentration of CBD projects of any of the major cities. In Mel-bourne’s case, we think this has been driven by the relatively high availability of large sites, especially in the northern blocks of the CBD.

Sydney has a much more balanced dis-tribution of apartments between the CBD, city finge and suburban submarkets. This is a function of the tightness of site availa-bility and the expense of land in the CBD. In Brisbane, the city fringe has been much more popular with foreign apartment developers than the CBD, although there is a much smaller relative penetration by foreign developers generally into the Bris-bane market to date, with a greater focus on nearby Gold Coast instead.




IN THE PIPELINE

The trend of foreign companies actively developing residential property in Aus-tralia appears to have a long way to run.

Only 40% of the apartments being facili-tated by offshore developers are under construction and more than 7,500 apart-ments are in the development pipeline.

Many of the large-scale projects, par-ticularly in the bigger markets of Sydney, Melbourne and the Gold Coast are staged, which will allow for adjustment to market delivery according to demand and this will limit development risk. Off-the-plan pur-chasing is common and will also allow for individual stages or projects to proceed in line with demand.

Recent project launches suggest demand from end purchasers for well located and quality product remains high, with reports of almost whole project stages being sold out on launch weekend, lead-ing to future stages being brought forward.

WHY THIS TREND, WHAT ARE THE IMPACTS AND WILL IT CONTINUE?

There appears to be a confluence of reasons why this trend has emerged so strongly in the past few years, some of which are similar to the motiva-tions behind the current high level of commercial property investment from offshore. Some of these reasons are:

1. Diversifying risk and providing for business growth in new markets. Many of the foreign companies developing residential apartments in Australia are well-established businesses in their home

countries. Rather than potentially over exposing their business to the economic/consumer cycles of just their home coun-tries, these companies are spreading operations with the aim of tapping into dif-ferent cycles.

2. Australia is considered a market with steady, reliable demand. Foreign devel-opers see Australia as a growth-style economy, with steady occupier and inves-tor demand for the end apartment product. Foreign developers believe, while there are cycles to be mindful of, that inevita-bly the underlying growth of the Australian economy and the population will provide opportunities to sell finished product.

3. Shifting equity to a safe country. By shifting equity into Australia to develop residential apartments, some developers are seeking to find a “safe haven” for this capital.

4. Dwelling starts are at a low point in the cycle in Australia. Recent high mort-gage rates and residential prices have suppressed overall buyer activity and caused dwelling starts, for both houses and apartments, to drop to a cyclical low. This means in most markets, there is less competition for those developers who can facilitate projects, while strong underlying user demand remains in most locations.

5. Development site costs are relatively low in the pricing cycle. There have been a large number of development sites on the market over the last few years in the wake of the global financial crisis. This has led to a drop in prices of anywhere




between 5% and 50%, but more typi-cally in the 20% to 30% range. Foreign developers have taken advantage of this situation, improving development feasibil-ity by purchasing at a lower rate.

6. A relative ease of doing property business. While there are always improve-ments to be made, foreign investors and developers tell us Australia is a relatively easy place to do property business. It is highly transparent, heavily informed and enjoys high security of real estate tenure.

The impacts of foreign involvement in the apartment market are many and are mostly positive. Critically, it’s providing

a stimulus to the construction sec-tor at a time when d e v e l o p m e n t activity is generally at a low level.

Second, it’s pro-viding new ideas, standards and designs to broaden the product range in Australia and introduce fresh competition in these areas.

Some concerns have been expressed about the potential for exacerbating the apartment oversupply situation in the Gold Coast, with 1,350 units proposed there by foreign developers. However, we think that given the lead time for the approval and development of such large-scale projects and provided they are carefully pitched to meet demand, this product should be readily absorbed into the local market.

Despite some concern for oversupply and settlement risk, the apartments devel-oped by foreign companies appear to have been well received into the local market, with a high level of sales off the plan and projects proceeding to completion. We see the risk of apartments developed by foreign-based companies as no different to those of domestic companies.

The drivers of this significant trend appear likely to continue. With strong growth in equity capital, especially in Asia, looking to geographically diversify and reasonable levels of demand for the end product driving solid development returns in Australia, subject to micro-market con-ditions, we expect this trend to continue into the future.

Q. I am in a same-sex relationship with an Australian citizen. Am I exempt if we purchase

residential property together as joint tenants?Yes, the spouse exemption applies to you if you

‘have a relationship as a couple living together on a genuine domestic basis’ (as defined in the Acts Interpretation Act 1901).

KEVIN STANLEY EXECUTIVE DIRECTOR FOR GLOBAL RESEARCH, CBRE



Regional hotel operators must find ways of enticing Chinese visitors to coast and country resorts or risk

another decade of struggle, according to the RBA’s December 2011 quarter bulle-tin. The RBA forecasts growth in Chinese visitors alone is expected to contribute about one-third of the growth in Australia’s tourism export earnings until 2020.

Between 2001 and 2011, Chinese visitor numbers have grown by 13.4% annually, contributing 16.4% to annual revenue, while Indian arrivals have increased by 12.3% annually, contributing 7.7% to tourism revenue. In comparison, visitors numbers from the US and UK have not grown over the last decade.

According to the Tourism Forecast-ing Committee, the share of spending by international visitors in total tourism expenditure in Australia is tipped to con-tinue to rise over the next decade, driven principally by strong arrivals from Asia.

“This poses a challenge for the tour-

ism industry in leisure and regional areas, which have at least to date had limited exposure to the growing segments of the inbound tourism market compared with Australia’s capital cities,” says the RBA.

According to the central bank, overseas visitors prefer to stay in capital cities (and capital city hotels) due “the importance of capital cities as major international gate-ways to Australia”.

“Capital cities have benefited from a ris-ing share of overseas visitor expenditure as spending by international visitors in regional areas has declined somewhat in recent years in real terms.”

“This trend is consistent with the strong growth in Chinese visitors – who dem-onstrate a strong propensity for travel to capital cities – and the decline in Japanese tourists that has had a more pronounced effect on overall tourism demand in some regional destinations.

MORE PAIN FOR REGIONAL HOTELS AS CHINESE TOURISTS PREFER CITY OVER COUNTRY: RBA

Q. Do I need approval to inherit

property someone left me in their will?

No, you are not required to apply for foreign investment approval. Any acquisition of residential property by way of an inheritance (settlement of a legal will) or by a court ruling is exempt from the requirement to seek foreign investment approval.

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“For instance, in 2010-11, Sydney and Melbourne were the most popular destina-tions for Chinese visitors (as measured by

visitor nights), whereas Japanese visitors have demonstrated a relatively stronger preference for travel to Queensland’s beach destinations, notably the Gold Coast and tropical north Queensland,” says the RBA.

According to the August Midwood Report, Queensland regional and leisure areas heavily dependent on overseas tourists suffered big drops in revenue when comparing the March quarter of 2011 with the March quarter of 2010.

Accommodation takings for Whitsunday Island resorts were down 16% compared with the same time last year, while takings on Great Barrier Reef islands and adja-cent mainland areas (including the likes of Port Douglas) were down 21% over this time frame.

MORE PAIN FOR REGIONAL HOTELS AS CHINESE TOURISTS PREFER CITY OVER COUNTRY: RBA (CONTINUED)

BURRAGA ISLAND ON THE NSW SOUTH COAST SELLS TO CHINESE INTERESTS

Burraga Island, a 121-hectare Shoalhaven River island, sold for $2.5 million to Chinese interests in

late June 2011.It is one of a handful of privately owned

NSW coastal islands, hardly paradise, but its sale price ranks it among the many tropical island counterparts.

It was sold recently, ending 34 years of Kennedy family ownership of the island.

It is about six kilometres up from the coastal Comerang Island, not far from the Princes Highway, Nowra Bridge. It is set between the northern village of Bomad-

erry and the southern village of Terara.The purchasing entity gives its director

as the Shanghai-born property developer Quan (David) Fang and its beneficial own-ers as Beauty Castle Enterprises, a British Virgin Islands-based company.

Although there appear to be no formal links, Fang is also a director of ASF Group, the publicly listed company that operates in Australia and through subsidiaries and investments in controlled entities across China, with a focus on mineral resources and energy, property marketing and travel services.



Demand for Australian commodities could take a hit if the cooling Chinese property market

continues to slump. According to ANZ’s China economists

Li-Gang Liu and Zhou Hao, Chinese authorities have “been actively cooling an overheating property market for the last two years”, with both Chongqing and Shanghai “experimented with a property tax”.

In addition, more than 20 first- and second-tier cities (the major capital cities and secondary provincial capitals) have imposed a “non-resident purchase restric-tion policy”, while an ambitious public housing program that aims to build 10 mil-lion affordable houses in 2011-2012 and 36.5 million by 2016 is expected to sub-stantially reduce demand in the private housing market in the foreseeable future.

“These policies have hit the property sector hard: transaction volumes have declined significantly, first in the top-tier cities, and then the second- and third-tier cities. New property transaction volumes declined by more than 30% in the first 10 months of 2011, compared with the same period in 2010,” the bank says.

“In October, the economy witnessed the biggest price decline since the introduc-tion of the 70 city indices in January 2011: new residential property prices in 33 cities have declined on a monthly basis, while prices in another 23 have remained flat,” Li-Gang Liu and Zhou Hao report.

CHINA’S PROPERTY SLUMP BAD NEWS FOR RESOURCES BOOM: ANZ

Q. I do not hold a temporary

residency visa but I wish to purchase residential property Do I need to seek approval?

Yes. Applications by foreign persons to acquire residential real estate will be approved if they meet the eligibility criteria. If you are not eligible for approval under the policy, then the acquisition is generally considered to be contrary to the national interest and will not normally be approved.



They warn that because the property sector is a “central pillar for the Chinese economy” the impact of a slump on the economy would be compounded by the lack of an alternative growth engine and the weak external demand for the foresee-able future.

“There is a close link between property sales and fixed asset investment, with a weak property market leading to slower

property investment,” they say. “A slump in the property sector will have

significant repercussions for related indus-trial sectors… Key linkages include the upstream industries of steel, cement and building materials; downstream industries of automobile and home appliance; and the intermediate sectors of banking and advertising,” say Li-Gang Liu and Zhou Hao.

CHINA’S PROPERTY SLUMP BAD NEWS FOR RESOURCES BOOM: ANZ (CONTINUED)

Q. I am a foreign national and was recently told that I would not need approval if I bought real estate through an Australian incorporated company or unit

trust that has at least one Australian director or shareholder/unitholder. Is this true?

No, and moreover, the FIRB would like to know the source of such advice so that we can advise them accordingly. Australian incorporated companies or trusts where 15% or more of the shares or units are beneficially held by foreign persons are themselves considered to be “foreign” under the Act and policy. It is wise to talk to the FIRB about particular structures before making any offers on property.

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Newland’s Sanctuary Lakes development in Point Cook, 30 kilometres west of Melbourne, has

attracted considerable interest from Chi-nese buyers, with 90% of buyers Chinese investors or owner-occupiers.

The development launched in mid-2010 and has sold 90 of the 98 lots available. The final 14 lots were released in January 2012, and the civil construction was com-pleted in June 2011.

Golden Waters is within the master-planned 61-hectare Sanctuary Lake community, designed around an 18-hole Greg Norman-designed golf course near a nature reserve and Port Phillip Bay.

Sanctuary Lakes has received a lot of attention, winning the 2004 Greensmart Award, the National Environmental Excel-lence award and the Australian Property Institute Development of the Year in 2004.

“Boasting uninterrupted vistas over the sparkling lake network and beyond to Mel-bourne’s city skyline, this is an incredible offering not to be missed,” says Newland marketing manager Melissa Tilley.

“With its prime location within the award-winning Sanctuary Lakes, coupled with the proximity to the city at just 23 kilometres as the crow flies, Golden Waters offers an ideal investment for the future, as well as a coveted lifestyle choice for today.”

Developer Newland and home builder Metricon are behind Golden Waters, which also includes a pool, gym, sauna, massage facilities and tennis courts for residents.

POINT COOK’S GOLDEN WATERS POPULAR WITH CHINESE BUYERS

Q. Can I apply before finding a

property?No, foreign

investment approval is required for a specific property you wish to acquire. You cannot apply for a general or ‘in principle’ pre‑approval.

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A delegation of Chinese investors inspected several farming proper-ties in Western Australia’s Great

Southern food bowl in August 2011.It included representatives of the Bei-

dahuang BDH Group, a state-owned company that has 5 million hectares in China’s Heilongjiang province.

The arrival of serious interest from Chi-nese in agricultural land has divided local farmers and the WA Farmers Federation.

The delegation of about a dozen people, which included agronomists, farmers and government officials, toured grain farms at Lake King and Ongerup with a local agent.

Nearby Lake Grace farmer and WA Grains Group chairman Doug Clarke says that he has had three meetings with the delegation regarding investment in local agricultural land.

“The Chinese buy or lease farms in Brazil, Argentina, New Zealand and North Africa and in return they develop excellent infrastructure,” he says.

Great Southern farmers have made it clear to the Chinese they that want good port access and a sophisticated supply

chain that is available for them to use as a third party. The Great Southern region ships through the Albany port zone.

“The delegation was responsive, and farmers here like the idea. I have been fielding a lot of calls from farmers I know wanting me to introduce the delegation to them,” he says.

So far the delegation has inspected properties that are already on the market, and foreign investors already own one –the Lake King property.

“The Chinese take their food security very seriously. One of them told me they produce 1.2 billion tonnes of grain and that is not enough,” Clarke says.

“Where we only produce about 3% of the world’s grain. We are very small in comparison.”

The WA Farmers Federation has expressed serious concerns about inter-est from China in 80,000 hectares of prime Western Australian cropping land.

Federation president Mike Norton believes if a large swathe of farmland falls under single ownership that many rural towns in the regions will disappear.

CHINESE INVESTORS EYE AUSTRALIAN FARM PROPERTY

Q. I am a foreign person who regularly visits family in Australia. Can I buy a second-

hand property with a family member who is an Australian citizen/permanent resident?

No. As a foreign non‑resident, you are not permitted to acquire any interest in second‑hand residential property, irrespective of whether you purchase it solely in your name or jointly with eligible persons (Australian citizens, permanent or temporary residents).

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Chinese developer CBD is create an unusually shaped 22-storey building in Southbank, in inner

Melbourne, called Banque88. Urban Design Architects has designed the pro-ject, which will resemble New York’s famed Flatiron building.

The development is at 33 Clarke Street but chose its name to be lucky in Chinese numerology. It is advertised in Chinese newspapers, and about half of the 27 apartments so far sold have been to Chi-nese buyers.

Paul Raimondo of Castran Gilbert, who is marketing the property, says about half of the Chinese buyers are owner-occupi-ers and half are investors.

However, he says, it is “interesting to

note that for the ones they are intending to rent out initially, in the long run they are earmarked for family members, especially kids”.

He says the proximity to Crown Casino has been a big selling point for Chinese buyers, and the marketing is designed to catch their attention.

“Our marketing is heavily towards the Chinese buyers in that the brochures are red (lucky), the number 88 is prominent (even though it’s at number 33 Clarke Street) and also the display building has red lanterns hanging up,” Raimondo advises.

Construction is expected to begin in February 2012 and be finished in the mid-dle of 2013.

SOUTHBANK’S BANQUE88 SHAPING UP

MELBOURNE’S EASTERN SUBURBS POPULAR WITH ASIAN BUYERS

Asian buyers look set to increase their investments in Melbourne’s upper-middle-class eastern sub-

urbs over the Chinese New Year period.Popular suburbs include Glen Waverley

and Balwyn, with a desire to own prestige property, feng shui alignment and access to better schools among the reasons why Asian buyers have bought homes recently.

The Ray White Glen Waverley office has recently sold a number of homes in the $2 million-plus price bracket to wealthy main-land Chinese buyers.

Director Damian Moore expects almost every property currently up for sale in the

suburb to attract interest from Asian buy-ers during the Chinese New Year season.

“Glen Waverley has a very large Asian community with varying financial means. Therefore we sell homes [to Asian buy-ers] from $400,000 to $2.5 million,” says Moore.

Moore says most of the suburb’s Asian buyers come from mainland China, Malay-sia, Singapore and Indonesia.

“Often the grander the house, the bet-ter – financial status at the high end of our market is very important.

“But you can’t beat good old ‘feng shui’ – most buyers will consider direction of

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Q. I have a business visa valid for three

years, but it only allows me to stay for periods up to three months at a time. Am I eligible to buy an established (second-hand) dwelling?

No. You must be living in Australia (not just visiting or staying for short periods of time), and your temporary visa must allow you to stay in Australia for a continuous period of more than 12 months.

MELBOURNE’S EASTERN SUBURBS POPULAR WITH ASIAN BUYERS (CONTINUED)

the home, adjacent streets, low side/high side, front door opposite back door, stair-case facing the front door,” he explains.

About 14 kilometres west of Glen Waverley, the affluent suburb of Balwyn has also experienced an influx of Asian buyers wanting to own property in the Balwyn High School zone bounded by the Eastern Freeway and Whitehorse Road.

According to Tim Heavyside of Fletch-ers Real Estate, property purchases by aspirational Asian families have increased from an average of 20% of Balwyn home buyers in the zone 10 years ago to about 60% of all purchasers currently.

“They may decide rather than invest $25,000 in school fees every year, I’ll uti-lise that in travel and educate my child in life, but they still get the benefit of being at the fourth-best school in the state,” Heavyside says.

According to Moore, selling to Asian buyers comes with its challenges.

“Most Asian buyers are very hard nego-tiators – they remain non-emotional about the purchase and must always feel in con-trol,” he says.

Melbourne real estate is not just proving popular with Asian families – Asian com-panies are also entering the market.

Asian property developers are making major plays in the Melbourne apartment market, with Hong Kong-based Far East Consortium building 2,600 apartments in the billion-dollar Upper West Side project on Lonsdale Street. Investors in the pro-ject come from Malaysia, mainland China, Korea and India.

Savills reported late last year that investors and developers from China, Singapore and Malaysia had spent more

than $100 million in buying Melbourne development sites in the past 18 months.

Last year Asian developers snapped up a 3,200-square-metre site at 224-250 La Trobe Street for $29.2 million with potential for more than 500 apartments while Singapore construction and prop-erty group Chip Eng Seng bought an 8,000-square-metre office building on a 900-square-metre block at 150 Queen Street for $25.5 million, with plans to con-vert it for residential use. Both deals were negotiated by Savills.

Another residential development site at 420 Spencer Street (2,250-square-metre site with a permit for 368 apartments) has registered interest from Asian buyers including SP Setia and Mammoth Empire Holdings, both from Malaysia, as well as private developers from mainland China.

In total more than half of the 17 proper-ties sold by Savills since March last year with residential development potential were snapped up by Asian buyers.

According to Savills divisional direc-tor of CBD sales and investments Nick Peden, Asian developers have bought eight properties, averaging $12.5 million, since March 2010.

“Melbourne offers sustained population growth, inexpensive land compared to home markets, the potential for significant growth, the benefit of freehold title, and its stature as the world’s most liveable city,” says Peden.

In a recent report on the influx of Asian property developers, CBRE said Mel-bourne was proving more popular with foreign developers than Sydney due to larger sites being available on the north-ern edge of the city.

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HOW TO UNDERSTAND CHINESE BUYERS: ANDREW TAYLOR

Amanda Sun bought three houses worth a total of $3 million on the Gold Coast after visiting just once

as a tourist. Sun is Chinese, 33 years old and owns

a small trading firm, according to a recent news story. She is typical of the Chinese buyers who have rescued many Austral-ian developers, agents and vendors from deeper price cuts and longer selling times in recent years.

Less than 12 months ago, the Chinese government got a shock when the results of a comprehensive survey of high-net-worth Chinese like Sun were released. The two organizations behind the sur-vey are very respectable, Bain & Co and China Merchants’ Bank, so the results can’t be written off as a fluke.

The survey revealed what many Aus-tralian agents had already been feeling: rich Chinese, for various reasons, want to get out of China, and they believe buying property in Australia and other countries enables their escape.

Not just a few rich Chinese want out. A full 57% of rich Chinese have con-

templated emigration. About 20% have actually completed immigration proce-dures in countries like Australia or expect

to do so soon. These percentages account for huge numbers of individuals, because China has the fourth-largest number of high-net-worth individuals in the world. Each year the cohort grows by nearly 10%.

Many of those rich Chinese emigrants are coming to Australia. China sent more immigrants to Australia in 2010 than any other country, including the UK and New Zealand.

Even as they sink roots into Australia, rich Chinese like Sun are also keeping a presence in China. For example, pub-lished research shows that about 80% plan to keep their Chinese passports.

It is common for the wife and child to live abroad, while the husband spends most of his time in China. Chinese émigrés might still run businesses in China.

They are usually moving abroad for their children. They believe that Western schools and universities are better than their Chinese counterparts, and that living overseas will give their children an advan-tage in life.

Foreign residency could also be use-ful in case China goes through policy shifts, like massive new wealth taxes or social unrest. China is a rapidly chang-ing country. Riots, strikes and protests recently doubled over the last five years to 180,000.

Emigration and educating children are just two of the reasons wealthy Chinese are buying property in Australia. The third is for investment.

As Sun puts it, Australia’s “legal system is better”. She plans to migrate to Australia to live in one of her new homes. She will find renters for the other two.

Q. My foreign citizen parents want to move into a unit in a retirement village here in Australia

to be near our family. They won’t actually own the unit – they will have a ‘lifetime’ lease permitting them to live in the unit. Will they need approval?

Yes, they will need approval for the acquisition of the lease (because the term of the lease is more than five years).

18



HOW TO UNDERSTAND CHINESE BUYERS: ANDREW TAYLOR (CONTINUED)

Australian property is an attractive investment in its own right, with credible economists predicting prices will be 55% higher in 10 years.

It also represents a diversification of risk. Instead of only investing in property in China, they put some of their money overseas so they don’t lose everything if the Chinese property market goes down.

Buyers like Sun have made a real impact on the Australian property market. As one agent told the Sydney Morning Herald about Chinese buyers, “They’re the only ones that have got the big dollars at the moment”.

The Financial Times has reported that Chinese buyers account for 20% of all purchases in Sydney. This may be an overestimate, but it reflects the trend. They tend to seek out property that has water views or is close to the ocean or major universities and CBDs.

Many developers depend on Chinese buyers for their off-the-plan unit sales. Chinese parents often buy Australian apartments for their children to live in while studying.

At the Stamford Residences, a 30-level tower at The Rocks in Sydney, one buyer recently bought a $2 million apartment to serve as this sort of student housing. Mainland Chinese buyers snapped up about six of the building’s 122 apartments.

In Melbourne, developer Morry Schwartz of PanUrban says, “Chinese buyers, both local and from Asia, account for about 60% of enquiries and purchases at Pan Urban’s developments. That’s up substantially from a few years ago.”

Meriton general manager Peter Spira told the Australian Financial Review that

Chinese buyers enabled the company to keep up production rates in Melbourne and Sydney through the GFC.

“We build between 1,300 to 1,500 new apartments each year in NSW and south-east Queensland,” Spira says.

Schwartz reckons, “You are not doing a good job at selling real estate in Australia today if you’re not marketing to the Chi-nese buyer”.

Chinese buyers also make their mark on the higher end of the market. Just this month, a luxury penthouse at Lumi-ere Residences in the Sydney CBD was reported sold for $8.1 million to an Asian, possibly Chinese, investor.

But, while new developments and lux-ury properties grab the headlines, the overwhelming interest I see is from Chi-nese buyers enquiring about affordable second-hand property in good locations.

Q. I am a foreign person and I want

to buy a transportable home in a caravan park. Even though I won’t be acquiring any land with this proposal, do I need approval?

You will need approval if you enter a lease for the site in the caravan park for a period in excess of five years.

ANDREW TAYLOR, FOUNDER, JUWAI.COM

19



ASIAN BUYERS VITAL TO AUSTRALIAN PROPERTY MARKET: MORRY SCHWARTZ

Asian buyers are vital to the success of future residential developments and developers must engage

with them, says Morry Schwartz, head of Melbourne-based property developer Pan Urban.

Speaking to Property Observer, Schwartz says Chinese buyers from coun-tries like Malaysia and Indonesia see a country like Australia as a safe haven for the long term.

“Sometimes Chinese people who are living in Malaysia or Indonesia feel slightly insecure about buying where they live because there may be anti-Chinese senti-ment in those countries,” he says.

Schwartz also believes Australia offers a more stable investment option than mainland China.

“In mainland China there is a strange political combination of capitalism in a socialist environment, not necessarily the most stable.

“People, who have wealth – some of them great wealth – worry about national-ism,” he says.

Furthermore, while Australian investors tend to be more insular in nature and are not inclined to buy an apartment in Hong Kong, Schwartz says Asian buyers don’t think it’s strange to buy in countries like Australia or Canada.

“And there is the education factor. Par-ents like to buy an apartment for their child who is studying at RMIT,” he says.

His comments following the launch of Juwai.com, promoted as the world’s largest international property search and information platform for Mandarin-speak-ing Chinese consumers.

The site has more than 1 million prop-erty listings from over 80,000 agents and

developers in the US, Australia, Canada, the United Kingdom and Japan.

Schwartz says there a “huge need” for such a site.

“Australian agents are looking for buy-ers, and Chinese buyers want to spend billions on Australian property. But getting the two groups together before Juwai cost a fortune.

“Agents had to travel to China for prop-erty expos, hire Mandarin-speaking staff or to split their commissions with Chinese agents — none of which is affordable in this marketplace.”

Taken as a group, local and offshore Asian buyers currently account for about 60% of enquiries and purchases at Pan Urban’s developments – “up substantially from a few years ago,” Schwartz says.

Q. I’m a foreign non-resident and my

spouse is an Australian permanent resident. If we’re buying a house together, do I require approval?

Yes. Even though your spouse doesn’t require approval, you are still required to seek foreign investment approval and submit an application. Approval will be granted according to the relevant eligibility criteria.

20



AZURE DEVELOPMENT DRAWS CHINESE INTEREST

Azure, a new development by CBRE and BridgeHill in the Sydney suburb of Rhodes, is

attracting interest from Chinese buyers, primarily owner-occupiers.

The waterfront development will feature 169 studio, one-, two- and three-bedroom apartments and three-bedroom town-houses across four waterfront buildings.

Studio apartments start from 40 square metres and $385,000, one-bedrooms range from 54 square metres to 67

square metres and start at $480,000, and two-bedroom apartments range from 82 square metres to 107 square metres and start from $638,000. Three-bedroom apartments start at 134 square metres and $998,000, and three-bedroom town-houses range from 127 square metres to 136 square metres and are priced from $1.23 million.

The project’s property manager esti-mates that about 40% of attendees at open for inspections have been prospec-tive Chinese owner-occupiers, with about 5% Chinese investors. Of the about 100 sold so far, about 35% have sold to Chi-nese owner-occupiers and 5% to Chinese investors.

Azure is being advertised in Chinese Herald Property Weekly and Chinese Sydney Property Weekly in order to target this market.

The interiors were designed by award-winning SJB Architects, and the units surround a garden square.

Construction began in early 2011 and is expected to be finished in September or October this year.

21



CHINESE INVESTMENT IMPORTANT FOR AUSTRALIAN PROPERTY: TED BAILLIEU

Victorian Premier Ted Baillieu has moved to allay fears about the impact of increasing Chinese

investment in Australia as he embarked on a trip of China in September.

He says the Foreign Investment Review Board is protecting “strategic interests”.

“Obviously the investment review board is in charge of these issues. Suffice to say work is being done so that we can keep an eye on our strategic interests, and I think that is a good thing,” Bailleu says.

Approved Chinese investments in Aus-tralia have totalled an estimated $60 billion since late 2007, including the purchase of farms, wineries and office towers.

This year, Chinese investment firms have continued buying up both rural prop-erties and offices.

Recent transactions include Chinese conglomerate HNA Group purchasing the 1 York Street office tower in the Sydney CBD for $117 million from Colonial First State.

Chinese investors also bought the Capercallie vineyard in the NSW Hunter Valley for about $2 million, and another Chinese group bought Burraga Island, a

121-hectare Shoalhaven River island, for about $2.5 million.

In August 2011 Baillieu unveiled a strat-egy of Victoria increasing the promotion of its agricultural, manufacturing and finan-cial services in China.

Bailleu says Chinese investment should be welcomed as it will help farmers sell their products in the second biggest and fastest growing economy in the world.

“I don’t think we should be shy in any way ... about investment in Victoria,” he says.

In a speech at the Australia-China Business Week forum in August, former premier of Victoria John Brumby said China’s investment in Australia must be viewed as an opportunity, not a threat.

“The Australia-China Business Council has shown that trade with China generated the equivalent of $10,000 per Australian household in the past year alone. So this is, by any measure, an important relation-ship,” Brumby said.

Q. I have been told that the developer has pre-approval. Can I still submit an application for

individual approval?No. The FIRB does not issue individual exemption

or approval letters if approval is not required. The developer must provide you with a copy of the pre‑approval letter, which you should keep with your records. You should only apply for individual approval if the developer’s pre‑approval is not valid – for example, if the dwelling is no longer new, or if you are not purchasing it from the developer named in the pre‑approval letter.

22



POINT PIPER ON THE CHINESE TOURIST ROUTE FOR INSIGHT INTO THE PRIVILEGED LIVES OF COMMUNIST PARTY PRINCELINGS

There’s apparently a new addition for sightseeing Chinese tourists when they visit Sydney.

Not just cuddly koalas and the Opera House – they have added driving along Wolseley Road, Point Piper for a glimpse of the $32.4 million property owned by a son of a former vice-president of China, according to a Wall Street Journal report.

Set high on a hill, above a towering sandstone wall and overlooking Sydney Harbour with picture postcard-perfect views of the bridge, Craig-y-Mor, the Point Piper non-waterfront residence, is owned by Zeng Wei and his wife, Jiang Mei.

The 2008 purchase was made just in the name of Jiang Mei. Quietly during 2009, the name of the Zeng Weo was sub-sequently added to the title.

By late 2009 the couple were seeking its demolition, to be replaced by a $5 million new home (architect’s impression at left), so they were both named for the first time in the much-anticipated end-of-year Syd-ney Morning Herald Title Deeds Christmas party column. It quickly sparked specula-tion in Chinese internet chatrooms.

Despite their names being published in an incorrect order and the restrictions on Baidu, the Chinese internet search engine, the web was soon alive with chatter linking Wei to his father, Zeng Qinghong, the former vice-president of the People’s Republic of China between 2003 and 2008, and once one of the most powerful men in the Chinese Communist Party. Jiang was noted for studying at the Beijing Dance Academy and, following a stint in television, at the Chinese property developer Renhe Group.

In April 2010, the Fairfax press pub-lished confirmatory details noting (in

correct order) businessman Zeng Wei, and his wife, Jiang Mei, were examples of the opportunities open to foreign investors in the right visa class.

“Mr Wei’s father, Zeng Qinghong, was vice-president of China between 2003 and 2008 and the fifth-ranking member in the Politburo Standing Committee,” the SMH and The Age report noted.

“In 2008, the couple paid $32.4 mil-lion for Craig-y-Mor in Point Piper, the third-most expensive house ever sold in Australia. The purchase was made after he obtained a business migration visa the year before.

“The grand 1920s house with renova-tions by Professor Leslie Wilkinson was initially bought just in his wife’s name, as was an earlier acquisition - a $1 million apartment in the World Tower block in Liv-erpool Street in the CBD in 2005.

“The couple’s application to demolish the house and replace it with a new $4.95 million home is being reviewed by Wool-lahra Council, which is seeking heritage advice,” the newspaper reported in an article by then property editors Jonathan Chancellor and Marika Dobbin.

The couple won planning approval on Christmas Eve 2010.

They currently have lodged an amend-ment seeking modifications for an extra tunnel excavation, this one to provide access to the pool and gym area.

The WSJ noted the elder Zeng, long the right-hand man to former president Jiang Zemin, was a member of China’s peak political body, the Politburo Standing Committee, for five years and before that headed the powerful Organisation Depart-ment, which is responsible for deciding who gets which political posts.

Architect’s impression: Gergely & Pinter Architects

23



SINGAPOREAN INVESTORS BUYING OFF THE PLAN IN PERTH

Singaporean investors have spent more than $11 million buying apartments off the plan in Fraser’s

new residential project in Perth.The development known as QIII is part

of Frasers’ Queens Riverside Hotel + Res-idences development, which will offer 408 luxury apartments in three buildings and a 236-room all-suites hotel operated under the Frasers Hospitality brand.

Frasers ran a series of seminars in Sin-gapore in November promoting the project to local buyers and attracted “exceptional interest” as well as sales of $11.1 million, according to CEO Guy Pahor.

The 26-storey apartment building will feature 265 apartments, of which 125 have been sold. Many of the Singaporean buyers purchased with the intention of upgrading from their existing Perth proper-ties as the time draws closer to completion of QIII.

Apartments are selling for about $730,000, with $1.4 million the top price achieved to date. It was for a three-bed-room apartment on the 21st floor.

QIII will be the second stage of the development, which is being built for Frasers by Diploma Construction. The first stage, the $107.5 million construc-tion of Fraser Suites Perth plus common basements and podium for the Queens Riverside precinct, is now underway.

Construction of QIII will commence in early 2012 and finish in January 2014.

24



APARTMENT PRICES COULD FALL IF CHINESE BUYERS PULL BACK: ROBERT GOTTLIEBSEN

Liquidity pressures back home and a weaker Australian dollar could cause Chi-nese buyers of off-the-plan apartments in Sydney and Melbourne to withdraw their offers, Business Spectator’s Robert Got-tliebsen warned in November 2011.

Gottliebsen says mainland Chinese investors have been the primary buyers of Sydney apartments in recent times, investing about $2 billion a year in Syd-ney. He says they are also major buyers in Melbourne, taking their annual investment rate to about $3 billion.

Before the global deterioration, he says

Chinese buyers were buying Australian apartments as part of efforts to have some of their funds outside of China “as a risk hedge”.

“But there are now much greater liquid-ity pressures at home, and those that bought when the dollar was around $1.08 are showing a 10% loss.

“At the moment, there are a great many apartment towers being built in Sydney and to a lesser extent Melbourne, where the mainland Chinese have bought off the plan, usually with a 10% deposit.”

“Australia’s largest apartment devel-oper, Harry Triguboff, has confirmed that Chinese buying of inner-Sydney apart-ments has halved in the last month. The China squeeze on its property market and fears about the level of our dollar are now having a direct effect on the Australian dwelling market,” he says.

“Triguboff believes that the sharp cut-back in Chinese apartment demand will probably reduce apartment prices in Syd-ney by about 10%, but the prices will not collapse. He believes that a fall in apart-ment prices will flow on to the whole dwelling market in Sydney.”

“Triguboff says so far all Chinese buyers have honoured their agreements but no one can be sure which way the Chinese will jump if the global crisis intensifies. If they failed to honour their agreements, then apartment prices would almost cer-tainly fall by more than 10%.

“The Chinese apartment pullback and the European bank withdrawal plus the truly astounding events in Europe – where (in the words of Westpac’s London man James Shugg) the world is watching a train wreck taking place in slow motion – is going to intensify the pressures on the

Q. I did not know I needed approval and have already entered an unconditional contract to purchase property – does that mean my contract is invalid?

No, the contract remains valid, but by entering an unconditional contract you have breached the FATA. You should submit a retrospective application. If you meet the eligibility criteria, retrospective approval is generally granted (that is, no action will be taken with respect to the breach as long as you comply with the standard conditions).

25



APARTMENT PRICES COULD FALL IF CHINESE BUYERS PULL BACK: ROBERT GOTTLIEBSEN (CONTINUED)

Reserve Bank to reduce interest rates a lot further.

We are not on the front line, but the missiles have reached our shores,” says Gottliebsen.

While Chinese buyers have started pull-ing back, Gottliebsen says lower interest rates and the lift in rents has started to rekindle Australian interest in apartments, which will be helped by the lower prices.

He highlights Triguboff’s fear the Aus-tralian banks may be on the way to “engineering their own train crash, albeit nothing anywhere near as serious as the European disaster”.

“Australian banks – having been the main driver of higher house and, to some extent, apartment prices – are once again lowering the values of dwellings in deter-mining how much they will lend. While the Chinese were buying apartments that did not matter, although it has contributed to a large number of unsold houses in most capitals.

“If Australians can’t get bank finance to buy apartments and the Chinese with-drawal intensifies, then we will see even greater pressure on dwelling prices. This is not a forecast, but when banks push prices up via their lending policies and then push them down with different poli-cies, then they have only themselves to blame for any losses,” Gottliebsen says.

“Of course, in the apartment market local councils and state governments have taken actions that have increased the price of apartments by about 15%.

“If the councils and other bodies made the rules for approvals straightforward and made their building requirements fit into economic construction methods and mar-ket demand, then apartment costs would fall,” he says.

This would enable Australians to buy them, but might affect the values of exist-ing apartments.

There will be many twists in this tale, some of them rather unpleasant.”

Q. I was unaware of the requirement for foreign investment approval when I bought some

land about six months ago to build a house and recently a friend told me that I may have breached the requirements because I should have obtained approval prior to purchasing the property. What action will the government take against me now?

Action will depend on whether your acquisition would have been approvable under the current guidelines. Worst case scenario: where it is considered inconsistent with policy you may be ordered to sell the land within a certain time. Provided you sell within the required time, prosecution is unlikely though details of the breach will be sent to the immigration authorities for any action they deem necessary.

26



UNDERSTANDING THE FOREIGN INVESTMENT REVIEW BOARD

The Australian government seeks to ensure that foreign investment in residential real

estate increases the supply of dwellings and is not speculative in nature.

Residential real estate means all Australian residential land and housing other than commercial properties (such as, offices, factories, warehouses, hotels, restaurants and shops) and rural properties (that is, land that is used wholly and exclusively for carrying on a substantial business of primary production).

Foreign persons are prohibited from acquiring established dwellings for investment purposes, including holiday homes, irrespective of whether they are temporary residents in Australia. However, temporary residents can apply to buy one established dwelling to use as their residence in Australia.

Approval is usually provided subject to a condition that the temporary resident sells the dwelling when it ceases to be their residence.

If you are applying to purchase residential real estate, you can submit an application through the online system.

Certain acquisitions do not require notification or approval under the Foreign Acquisitions and Takeovers Act 1975. New dwellings acquired off the plan are normally approved where the dwellings have not previously been sold.

There are no restrictions on the number of such dwellings in a new development that may be sold to foreign persons, provided that the developer markets the dwellings locally as well as overseas (that is, the dwellings cannot be marketed exclusively overseas).

A property purchased under this category may be rented out, sold to Australian interests or other eligible purchasers, or retained for the foreign investor’s own use. Once the property has been purchased, it is second‑hand real estate and is subject to the restrictions applying to that category.

http://www.firb.gov.au/content/policy.asp#temp_resident

27



UNDERSTANDING THE FOREIGN INVESTMENT REVIEW BOARD(CONTINUED)

Foreign persons should determine whether their proposed acquisition is exempt and if in doubt, seek legal advice.

You do not need to submit an application for approval to acquire real estate in Australia if:

• you are an Australian citizen living abroad;• your spouse is an Australian citizen (not

a permanent resident) and you are purchasing residential real estate in both names as joint tenants (not tenants in common);

• you hold a permanent resident visa and you are purchasing residential property;

• you are purchasing new dwelling(s) from the developer, where the developer has pre‑approval to sell those dwellings to foreign persons;

• you are acquiring an interest in developed commercial property where the property is to be used immediately and in its present state for industrial or non residential commercial purposes;

• you are acquiring an interest by will or by operation of law (such as, a court order regarding the division of property in a divorce settlement, but not if both parties simply agree to transfer property without a court’s intervention); or

• you are purchasing property from the government.

Source: Foreign Investment Review Board

Property Observer readers who wish to ask more specific questions should do so via:

The Foreign Investment Review BoardC/‑ The TreasuryLangton CrescentParkes ACT 2600, AustraliaTelephone Inquiries +61 2 6263 3795 (9:00 am – 12:30 pm and 1:30 pm – 5:00 pm AEST, Monday to Friday, excluding public holidays)Email: [email protected]



CHINESE APPETITE FOR GOLD COAST PROPERTY SOARS TO RECORD HIGHS: COLLIERS

Chinese buyers accounted for nearly a third of foreign purchases of Queensland residential real

estate during the 2010-11 financial year, with record amounts spent on Gold Coast property, according to research compiled by Colliers International.

The Gold Coast was China’s preferred local authority during the 2010-11 year, and they spent a total of $66.9 million (40% of the total amount spent by for-eigners) in the area. This was followed by Brisbane with $30.4 million and Logan with $4.8 million.

Gold Coast figures for 2010-11 were 128% higher than the previous year, when Chinese buyers spent $29.3 million – the largest amount spent by Chinese buyers in a single year since Colliers began to monitor foreign investment figures.

Tony Holland, Colliers International Gold Coast director of project marketing, says the Gold Coast is a favoured desti-nation for Chinese and other foreigners because of its year-round sunshine and attractive lifestyle opportunities.

Furthermore, with two expanding inter-national airports – Brisbane and the Gold Coast – close by, it is easily accessible both domestically and internationally.

In December 2011, China Southern air-line announced it would launch up to four direct flights a week between Coolangatta and the Chinese city hub of Guangzhou by 2015.

“Within five years China is expected to eclipse New Zealand as the Gold Coast’s number-one tourism provider,” Holland says.

“With continued strong tourism, the popularity of the Gold Coast with foreign buyers is encouraging and, with the cur-rent stock of new apartments now down to a 10-year low, these figures should provide developers with confidence to commence new projects over the coming 12 months,” he says.

While overall foreign investment in the Queensland has declined since the GFC (the 2007-2008 financial year), Chinese buyers have not been deterred, spending almost $107 million in the state’s property

Q. Can you give me an example of a ‘condition’ to include in the contract?

‘This contract is subject to foreign investment approval. If such approval is not obtained within 40 days, this contract is terminated and all monies deposited will be refunded.’

29



HUNTER VALLEY VINEYARD A GOLDEN OPPORTUNITY FOR CHINESE BUYERS

The Golden Grape Estate winery and restaurant at Pokolbin in the lower Hunter Valley of New South

Wales was bought by Chinese interests in September 2011.

The winery, with history dating back to 1866, was sold for $2.8 million to busi-nessman Genghua Lin.

It is among the increasing number of prominent Hunter wine tourism properties sold recently to Chinese interests.

Golden Grape Estate boasts a wine

museum that features the oldest wine press on the continent.

The 42-hectare Golden Grape hold-ing sold through Jurds estate agent Cain Beckett, who says the Golden Grape price was ‘‘very strong,’’ at a time when there was ‘‘no domestic market for vineyards’’.

The vineyard is made up of classic Hunter Valley varietals including shiraz, chardonnay, verdelho, muscat and mer-lot and is watered by three dams and a 10-megalitre PID allocation.

market over the year to June 2011, a 50% increase on the $71.5 million they spent in the previous financial year.

Colliers records 203 transactions by Chinese nationals in 2010-11 financial year – with $106.8 million the largest amount spent in a single year by Chinese buyers, notes Lynda Campbell, Colliers International Gold Coast research manager.

Although the numbers are slightly down on last year, China buyers also dominated spending by foreigners across Brisbane,

with a total of $30.4 million spent over 61 transactions. The year 2010-11 was the fourth consecutive year that Chinese buyers were the most prolific foreign pur-chasers of Brisbane property.

More than three-quarters (77%) of prop-erty transactions by Chinese nationals in Queensland were for investment pur-poses, while the remaining 23% were for owner-occupation.

During the past 10 years, China has spent a total of $366.3 million on Queens-land property.

CHINESE APPETITE FOR GOLD COAST PROPERTY SOARS TO RECORD HIGHS: COLLIERS (CONTINUED)

Q. I wish to rent a property to live in while I am working/studying in Australia. Do I need

foreign investment approval to enter a lease?Only if the lease (and any options) is for a period

longer than five years (this is uncommon for residential real estate).

30



Sales of Melbourne residential development sites to Asian buyers have soared in the past two year

and the boom is set to continue, according to both Savills and CBRE.

Savills says Chinese, Singaporean and Malaysian buyer interest in Melbourne development sites has reached “unprec-edented” levels after it negotiated the sale of about $100 million worth of Melbourne inner-city development sites over the past 24 months to Asian-based buyers.

Asian buyers have included Chip Eng Seng of Singapore, who purchased 150 Queen Street for $25.5 million for residen-tial conversion, and an unnamed Asian buyer who bought a 3,200-square-metre site with potential for more than 500 apart-ments at 224-250 La Trobe Street for $29.2 million.

Malaysia-based SP Setia is currently developing its $470 million Fulton Lane project, which will comprise 487 units, of which more than half have already sold.

Savills says fellow Malaysian devel-oper Mammoth Empire Holdings has also invested in Melbourne residential sites along with countless private developers from mainland China.

Clinton Baxter, Savills’ head of city sales and investments, says off-shore develop-ers have long recognised that the sound fundamentals of Melbourne made it very attractive for investment.

“We have sold 17 properties with resi-dential development potential over the last two years, with more than half of those to offshore Asian purchasers,” he says.

“In many cases the Asian buyers have a significant, additional, competitive advan-tage over local developers by being able to source funding from off-shore, and in

doing so enjoying cheaper costs of debt whilst avoiding the onerous capital restric-tions of the local banks.

“Given the current level of enquiry we expect sales to Asian buyers to continue to play a significant hand in the sale of development sites across Melbourne,’’ he says.

CBRE’s Mark Wizel says the recent drop in the Australian dollar towards the latter half of 2011 sparked renewed interest from overseas developers for Mel-bourne sites.

Wizel says in CBRE’s experience devel-opers from mainland China are generally more comfortable acquiring suburban – rather than CBD – sites in locations such as South Yarra, Prahran, Brighton, Bal-wyn and Doncaster. However, he says Malaysian and Singaporean developers tended to focus on more “core” locations such as the Melbourne CBD and St Kilda Road.

“We estimate that mainland Chinese groups have spent in excess of $170 mil-lion on acquiring major inner-city sites over the past two years, with an additional $130 million in sites being sold to devel-opment companies with direct interests in Singapore and Malaysia,” Wizel says.

One such example was Setia Austral-ia’s $25 million-plus purchase of 557 St Kilda Road.

Another is Beijing-based LYZ Property Group, which is about to begin sales and marketing on the former Deague family’s site at 4-10 Daly Street, South Yarra.

Savills head of city sales and invest-ments Clinton Baxter says offshore developers have long recognised that the sound fundamentals of Melbourne made it very attractive for investment.

ASIAN BUYERS BUYING UP INNER-CITY MELBOURNE RESIDENTIAL DEVELOPMENT SITES

Documents

Foreign Investment In Australian Property Year Of The Dragon