News summary. Two Chinese consortiums plans $3 billion of investments in Aust, vendor financing introduced for settlement pipeline by one developer, too many Chinese developers have bought too many sites at too high prices, Chinese developers moving into house & land packages, SIV program at risk and more…
United Investment, backed by 10 China-based developers, plans to invest up to $2 billion in Australia, mainly in Sydney, over the next three to five years. (The Australian, 8 Sept.)
The group is currently backing at least four development projects; VIG’s project in the Sydney CBD, Tasman Funds Management’s projects in Wolli Creek and Epping, and Hong Kong-listed SRE Group’s in Lane Cove. It will also seek to develop projects in its own right.
The group’s 10 developers are led by Shanghai Zhongbang Property Group. They will also seek additional investment capital from other partners including Chinese financial institutions.
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Double Gold Stone, (DGS) a Chinese-led consortium, is planning to build a $1 billion skyscraper in Brisbane’s CBD. (The Australian, 7 Sept.)
Development manager PDS Australia has called for interest from builders and developers to partner with DGS to construct the residential and serviced apartment project. DGS is also planning a dozen mid-rises in Sydney and a high-rise in Epping.
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Chinese developer Greaton, (formerly Zhengtang Group), has won approval for its $260 million residential project in Epping, north-west of Sydney. (The Australian, 8 Sept.).
The firm joins other Chinese-backed developers such as Poly and Chiwayland in developing in the area. Greaton’s project comprises 254 apartments in two 17-storey towers with retail space.
Greaton, based in Wuhan, is also the buyer of Grocon’s $700 million The Ribbon Darling Harbour hotel project in Sydney.
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Chinese backed developer B1 Group and its Hong Kong-listed partner Shimao Property are launching vendor financing for buyers of their apartments. (AFR, 5 Sept.)
The two firms will search for and guarantee funding for buyers of their latest release of apartments at their Erskineville development, Casa Residences in inner south Sydney.
20% of the 100 apartments are expected to be sold to foreign buyers. A LVR of 60 to 70 per cent will be offered, with the lower end of private loan rates of 6 to 7 per cent, according to the AFR.
Funding will come from vetted private lenders but eventually, B1 and Shimao will consider providing their own capital for vendor financing.
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CoAssets, an online platform to connect lenders to companies seeking alternative financing, listed on the ASX on 5 Sept. The firm raised $6.55 million in an IPO and has a market capitalisation of $85m.
CoAssets specialise in funding of up to $5 million and have funded $44 million in residential and small business projects in South East Asia since it started in 2013 in Singapore. The firm is expanding into Australia and China, and plans to connect Australian developers and Chinese lenders.
CoAssets will provide $100,000 to $500,000 mezzanine funding for property developers and has five boutique Australian residential projects in its pipeline. It will eventually expand into construction finance. (The Australian, and the AFR 6 Sept.)
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Billionaire property developer Bob Ell (Leda Group) told The Australian, 12 Sept, that government taxes on foreign buyers, ‘have brought the Chinese market almost to a stop,” estimating that on the Gold Coast, about 15 per cent of sales had been knocked out.
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Shanghai-based developer Dahua Group has bought a third land parcel, this time of 134 hectares in Sydney’s southwest from Campbelltown City Council. (The Australian, 12 Sept.) The developer now has land sites to create nearly 4,400 homes and a new town centre in the area.
Poly and Hailiang are also moving into house and land developments in western and south western Sydney.
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Many foreign developers, particularly from China, have paid too much for development sites in speculative acquisitions over the past few years, according to JQZ director Jianqiu Zhang, speaking to the Australian 8 Sept.
These developers now face mounting pressure to sell the properties, as many of them don’t have local knowledge, particularly about market risks and were too rash in making acquisitions, he said.
Zhang said he has been approached to buy out seven or eight development projects. JQZ is currently building about 2,000 apartments, with plans for another 3,000.
Aus-China Non-Bank Lending Conference, 22 Sept 2016 | Westin, Grand Ballroom, Sydney Click here
NSW Strata Law Change -opportunities for site acquisitions from the 75% majority rule, when fairness meets fortunes,28 Sept 2016, Sydney Click here
Poly Australia will open an office in Melbourne this year (The Australian, 6 Sept.) as the developer seeks opportunities in Victoria. It was the under-bidder for Melbourne’s Telstra tower earlier this year and will be evaluating both prime office and residential projects in the city.
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Developer JTX International led by Anthony Elcheikh aims to commence work on a $1.7 billion mixed-use project in Melbourne’s north within the next six months. (AFR, 7 Sept.)
The project comprises 150,000 square metres of mostly commercial real estate across a 32-hectare site in Craigieburn. It is partly backed by a Significant Investor Visa (SIV)-compliant fund run by JTX.
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Securities broker CLSA says there are $16 billion of excess apartments in Melbourne and Brisbane at risk of failing to settle in the next two years as banks turn their back on the space and less capital enters from China. (The Australian, 3 Sept.)
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A $10.5 million penthouse in Sydney settled 18 months ago is now on the market for $13 million. (SMH, 10 Sept.) The apartment is ‘owned’ by Bao Bao Wan, nicknamed the ‘Red Princess’ in the SMH article but who rarely stayed at the apartment. Her late grandfather, Wan Li, was a first-generation communist revolutionary who rose to the office of vice-premier and chairman of the National People’s Congress.
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A million new jobs could be created in the health, education, tourism, finance and construction sectors within 10 years by growing trade with China, according to The Australia China Business Council report, “The Long Boom: What China’s Rebalancing means for Australia’s Future”.
This would mark a 22 per cent rise over present employment levels, and represent the fastest such growth in 25 years. The report was produced by Monash University’s Australian Centre for Financial Studies and sponsored by Chinese-Australian accounting group ShineWing.
Based on “relatively conservative scenarios for Chinese growth”, China could represent by 2025 up to 47 per cent of healthcare exports, 41 per cent of educational exports, 35 per cent of tourists, 19 per cent of financial services exports, and 13 per cent of construction exports. (The Australian, 7 Sept.)
Significant Investor Visa (SIV) program – recommendation for closure
The Productivity Commission publicly released its report on Australia’s immigration program on 12 Sept. It released the report to the government in April this year.
The PC notes that ‘overall, the case for retaining the Significant and Premium Investor Visa Programmes is weak and the Government should abolish these visas.’
Treasurer Scott Morrison is expected to soon table in Parliament his recommendations for the immigration program as a result of the PC report
The 57-page PC report is here
An excerpt from the PC report on the SIV is below
‘Investment visas — the case is not compelling’
‘Investor visas are granted to people who invest in certain classes of assets in Australia. The thresholds range from $1.5 million for the Investor visa to $15 million for the Premium Investor visa.
These visa classes account for a very small proportion of the total migrant intake. (Basis Point insight – 46 approvals each month in the 2016 financial year under both the old and new investment regime)
Data limitations constrain an assessment of these visa streams.
The complying investment frameworks permit Significant Investor visa and Premium Investor visa holders to invest the majority of their money in assets that are highly liquid, including blue-chip equities, corporate bonds, and government bonds.
The marginal addition to investment in these assets that is induced by the investor visa classes is unlikely to have any impact on the cost of capital for Australian businesses.
Applicants for the Significant Investor visa are also required to invest $500 000 in managed funds that invest in venture capital or growth private equity.
These are riskier asset classes that attract less foreign investment.
However, the Commission found in the 2015 inquiry report Business Set-up, Transfer and Closure that government intervention to expand the venture capital sector is not required.
The small size of Australia’s venture capital sector is mainly a result of the small number of opportunities for investment.
Compelling additional investment in high-risk managed funds will benefit fund managers, but is unlikely to deliver a material amount of additional economic activity in Australia.
On the other hand, there are potential downside risks to these visas. Because there are no English-language requirements for the Significant Investor visa and Premium Investor visa, and no upper age limits, it is likely that these immigrants will generate less favourable impacts than other immigrants.
Further, compared to other visa streams, investor visas are prone to fraud. The residency requirements (160 days over four years) are very relaxed — only requiring the holder to reside in Australia 11 per cent of the year on average over four years, effectively a non-resident permanent visa.
Overall, the case for retaining the Significant and Premium Investor Visa Programmes is weak and the Government should abolish these visas.’
Excerpts on the BIIP
‘Immigrants who are prepared to own or operate a business, or make a substantial investment in Australia may also be able to immigrate through the Business Innovation and Investment Programme (BIIP).
The majority of immigrants through this stream (between 6000 and 7000 per year) come through the ‘business innovation’ stream, which requires them to own or manage a business in Australia with requirements to achieve a minimum level of turnover.
Most immigrants through this stream own or operate established businesses in retail or hospitality with fewer than five employees.
The BIIP has recently been reviewed by the Joint Standing Committee on Migration. It found that limited data exist to assess the impacts of the program, and that it is probably not meeting objectives related to increasing innovation or linking with international markets.
The Commission agrees with this assessment. The Australian Government, working with state and territory governments, should strengthen data collection for this stream, and review the program once better data are available.
As part of its National Innovation and Science Agenda, the Australian Government recently announced a provisional entrepreneur visa to facilitate the entry and residence of entrepreneurs with innovative ideas and financial backing from a third party.
Eligibility criteria for these visas are yet to be established. The Australian Government should at a minimum require that applicants meet some of the standards of the permanent skill stream, and most particularly those related to age, English-language proficiency and skills.’
Excerpts of the PC report summary and terms of reference is below
Immigration is a defining feature of Australia’s economic and social life.
More than one in four Australian residents are born overseas, and close to half of the population have at least one parent born elsewhere.
In the absence of a formal population policy, Australia’s immigration policy is its de facto population policy.
The Australian Government has requested the Productivity Commission to conduct an inquiry into the impacts of immigration on Australia and the way immigrants are selected.
The terms of reference for the inquiry ask the Commission to examine:
- the costs and benefits of temporary and permanent immigration
- options for determining the intake of migrants with a greater focus on charges
- the interaction between temporary and permanent immigration.
In 2014-15, Australia granted permanent residency to around 204,000 people — 129,000 for the skill stream, 61,000 for the family stream and 14,000 for the humanitarian program.
The Commission’s assessment is that the current skilled migration program falls short of generating the best outcomes for the Australian community more broadly.
(The program should target) migrants who are younger, more skilled and who have higher English-language proficiency.
Aus-China Non-Bank Lending Conference, 22 Sept 2016 | Westin, Grand Ballroom, Sydney Click here
NSW Strata Law Change -opportunities for site acquisitions from the 75% majority rule, when fairness meets fortunes,28 Sept 2016, Sydney Click here