Developers from mainland China bought A$2.4 billion ($1.84 billion) worth of Australian residential sites in 2016, accounting for 38 percent by value of the land sold in the country for housing construction, according to a recent research report by property consultancy Knight Frank.
The acquisitions by Chinese firms accounted for 32 percent more of the total market for new Australian housing projects last year compared to 2015, helped along by a surge of larger deals involving transplanted mainland companies such as Dahua and Aqualand. 2016 also saw expanded Aussie activity by giants such as Ping An Insurance.
Chinese Developers Grow Market Share Down Under
“Chinese developers and investors purchased A$2.4 billion worth of Australian residential development sites in 2016,” Knight Frank’s Head of Residential Research for Australia Michelle Ciesielski commented in a statement. “In the past three years, Chinese developers and investors accounted for over 25 percent of disclosed total sales each year – with 2016 recording a share of sales as high as 38 percent.”
According to Knight Frank, the increase in market share by mainland investors is due to continued enthusiasm for land Down Under from China in what was overall a down year for the market. “Despite overall total sales falling during 2016, and sales to Chinese developers and investors still being 11.2 percent lower than the market peak recorded in 2014, their influence has grown,” Ciesielski said.
And it’s not just the mainland’s developers that are getting involved in the Australian housing market. In June last year, China’s Ping Insurance Group, one of China’s five largest insurers, made its second residential development joint venture with leading public-listed Australian real estate group, agreeing to co-develop a 500 apartment project on Sydney’s north shore.
Mainland Bets Getting Bigger
Part of the reason for the surge in the value of Chinese land buys in Australia in 2016 is the increasing willingness of the mainland players to make larger bets after gaining experience in the market over the past few years.
In April of last year China’s Dahua Group revealed plans for an A$1 billion (then $761 billion) master-planned estate in Sydney’s southwest suburb of Bardia, and the mainland player followed up in August by picking up two sites in a single month.
Transplanted Chinese developer Aqualand – which is a subsidiary of Shanghai Shenglong Investment – also acquired multiple Aussie sites last year, including buying two Sydney projects during the month of July.
Knight Frank found that in 2016, the average residential development site purchase by a Chinese developer had an area of 21,045 square metres – increasing more than 18 times from 2012 – and averaged a potential 502 dwellings per development site.
The 2016 trend appears to be continuing in the new year with Guangzhou-based development giant R&F Properties revealing last week that it plans to develop a 10,000 apartments in Brisbane, Australia as part of a 15-year A$6 billion project.
Aussie Upswing Tracks with Hong Kong Experience
The increase in Chinese activity in Australia tracks closely with mainland players taking a larger share of the market in Hong Kong.
Mainland Chinese companies scooped up 29 percent of new land sold for development in Hong Kong during 2015 and 2016 according to recent data from local brokerage Midland Realty.
The figures represent a sixfold increase compared to mainland buyer activity in 2013-2014 and it has some Hong Kong developers concerned.
Ronnie Chan, chairman of Hong Kong developer Hang Lung Properties, complained of an “irrational fever” infecting land auctions in his home town last month, and complained that aggressive bidding by mainland rivals had made it difficult for his company to acquire sites.