Knight Frank has published its third Chinese Outbound Real Estate Investment Report titled Changing Currents, Rising Tides. Riding on last year’s strong momentum, the waves of Chinese outbound capital continued in major real estate markets around the world in H1 2016, with more to come through the rest of the year.
According to Knight Frank’s Head of Research and Consulting, Australia Mr Matt Whitby, “The volume of Chinese investment in Australia is down considerably year-on-year because of a lack of mega-deals in the first half, as large deals such as the Investa portfolio dragged the 2015 number higher.
“Amid competition from other Asian buyers, however, there is a strong Chinese appetite for en-block commercial properties in both Sydney and Melbourne, attracted by rental growth supported by strong tenant demand and a supply shortage,” said Mr Whitby.
In Australia, with the absence of mega-deals such as last year’s CIC’s record breaking purchase at US$1.8bn for an office portfolio, the volume of office deals dropped 65% and hotel deals dropped 42% YoY. Investment in development sites stabilised. Nonetheless, Chinese and other Asian capital remain drawn mainly to Sydney and Melbourne’s office markets given their short supply and rental growth prospects. One important observation is that Chinese developers are now looking to diversify into income producing properties.
In Australia, Chinese investors and developers spent US$1.7bn in Australia in 1H 2016 – a 37% decline year-on-year. With the absence of mega deals, such as CIC’s record-breaking purchase at US$1.8bn for an office portfolio (AUD2.45bn), the volume of office deals dropped 65% and hotel deals dropped 42% year-on-year. Meanwhile, investment in development sites stabilised.
According to Knight Frank’s Head of Asian Markets, Australia Dominic Ong, “Chinese and other Asian capital continues to be drawn mainly to the office markets in Sydney and Melbourne. Tenant demand from various sectors remains strong, but lack of supply has caused rents in both cities to rise and vacancies to fall. Yields, meanwhile, have been tightening, but are still above long-term bond yields.
“Fewer buying opportunities, coupled with the positive rental outlook, have already attracted large Chinese private developers such as Poly Group and Shanghai Shenglong to the office market. Since June there have been a number of major deals in the making, which will underpin the investment market outlook for 2016.
“Activity has picked up in the past few months. Some of the most recent transactions in Australia from Chinese buyers include 15 Help Street, Chatswood which sold for AUD43.8m to One Pro Investment Group; 20 Bridge Street, Pymble which sold for AUD78m to YuHu; 210 George Street, Sydney sold for AUD160m to Poly Group; and 61 Lavender Street, Milsons Point sold to Aqualand for AUD110m,” said Mr Ong.
Source: Knight Frank