Insights on Chinese apartment settlements.
71% of offshore Chinese buyers in the US real estate market paid completely with cash, according to the (US) National Association of Realtors. 20% secured mortgages from banks operating in the US. In comparison, only 7 percent of Indians paid all in cash, while 90 percent had financing from US banks.
Total sales of US residential properties to offshore Chinese buyers in the year to March 2016 fell to $27.3 billion from $28.6 billion a year earlier, according to an annual report of the National Association of Realtors. It was the first fall since 2011.
The number of properties purchased by Chinese also declined to 29,195 units from 34,327 units. (China Daily, 8 Aug)
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Concerns about the drying of bank financing, and extra stamp duties imposed on offshore buyers raised concerns about settlement.
- A higher proportion of off-the-plan buyers, roughly one in 20, walked away from their Melbourne apartment purchases in June, according to law firm Maddocks. (AFR 3 Aug)
The firm processed over 800 apartments contracts in June and said 5% of deals did not settle. This compares with a historical average of about 3 per cent. Of those buyers who did not settle in June, roughly two-thirds were foreign-based.
- Lanny Xu, chief executive of Iron Fish China, a broker’s agent in Shanghai, said about 20 per cent of his clients who purchased Australian apartments cannot complete the deal and are trying to sell. (AFR 28 Jul)
- Meanwhile, AC Property, a Melbourne-based Chinese focused property portal, has four or five calls every day from buyers who seek to resell their off-the-plan apartments after concerns about up-coming settlements.
- Boxing Overseas, a Nanjing-based agent specialising in Australian properties, only sold two properties last month, compared with about 30 in previous months. (The Australian, 8 Aug)
However, Basis Point’s research suggests that for the majority of offshore buyers, their ‘pain point’ is higher and most will settle, particularly with the help of non-bank lenders. See our newsletter last week.
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Lend Lease settled 1203 units in Sydney, Melbourne, Brisbane and London over the past year worth $5.2bn. Lend Lease CEO Steve McCann said fewer than 1 per cent of the apartments sold last year missed settlement, down from the 3 per cent historical average.
Mr McCann said foreign lenders and private equity funds have started to provide extra funding for residential projects after the domestic banks’ decision to tighten lending standards. (The Australian, 20 Aug)
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ASX listed developer Mirvac reported 2800 properties went to settlement last financial year, with a default rate of under 1%. The firm has a strategic overweight exposure to the Sydney and Melbourne residential markets. (AFR, 17 Aug)
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Hong Kong residential property prices have proved resilient, confounding the doom merchants who predicted up to a 40% slide this year due to weaker Chinese growth. (Dow Jones Institutional News, 10 Aug)
Apartment prices have rebounded and shares in Hong Kong’s top listed developers have outperformed the local Hang Seng Index by 15% after being pummeled in January’s sell-off.
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
Comments by property veterans
“You can talk to any developer of high-rise and they will tell you up to 50 per cent of presales are to Chinese sign-ups. The fact is that’s stopping with a thud,” Aussie Home Loans founder John Symond told The Australian 11 Aug.
‘The demand for new apartments is drying up very, very fast,” adding that many of the big developers he talked to were now shelving projects (that in turn is reducing the expected supply in 2-3 years time)
(But) “I don’t believe there’s a housing bubble risk at all…“I think there’s going to be a temporary concern of oversupply of apartments in certain regions only.
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A wave of development sites is on the market as funding for apartment developments dries up, according to Meriton Group founder Harry Triguboff.
“I have never seen so many development sites for sale, but prices are not dropping much, maybe 10 per cent,” Mr Triguboff said. ( adding that many approved projects would not be developed in this cycle.) “I assure you that there is no bubble in the making.’ (The Australian, 11 Aug)
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Meanwhile, Mark Steinert, Stockland’s chief executive, said while the rate of price growth was now back to about 4 -5 per cent per annum, population growth and “significant” under supply of land, will continue to underpin the residential sector. (SMH, 17 Aug). Stockland is the largest seller of dwellings in Australia produces with a record 6135 lots sold last financial year.
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Excert of the RBA statement on Monetary policy 5 August
‘Conditions in the established housing market appear to have eased since last year. While one source of data recorded strong growth in housing prices in April and May, that growth appears to have been overstated and other sources suggest that housing price growth was modest over those and more recent months.’
We’ve copied 2 relevant graphs below
Graph 1 Note the surge in dwelling units under construction in the past year in NSW, VIC and QLD
Graph 2 Rental vacancy rates below show undersupply (for now) in Sydney,… and balanced, (at 3%), in Melb and Bris, although both are trending towards oversupply given the expected surge in settlements next year
Property deals
Chinese-backed Australian developer Aqualand is buying a heritage building at Sydney’s Millers Point, for a possible HQ conversion or mixed-use complex. (The Australian, 13 July)
The developer has made a string of purchases in the past 12 months including:
- an office building in Milsons Point for $140 million, with plans for a luxury 135-apartment project, (AFR 22 July).
- a North Sydney office building for $157.5 million for conversion into 415 luxury apartments. (AFR 13 July).
- an office building and warehouse in Macquarie Park for $54 million ( The Australian 12 July).
Aqualand with consortium partners Grocon and Scentre Group are tipped to win the NSW government’s $2 billion Central Barangaroo project (AFR 14 July)
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Greenland Group will bid for the second stage of a new state government land release at Macquarie Park in Sydney’s north, (The Australian, 15 July). This comes after winning the public tender for the first stage last year, paying $190m for the 1.5ha land holding with plans for a $500m mixed-use project.
Other bidders for the second stage include Japan’s Sekisui House, Aqualand and local group Toga.
Meanwhile, Greenland Construction, a related company to the Greenland Group, is said to be looking to establish a construction company in Australia, which will be through the acquisition of existing construction businesses. (AFR 19 July).
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Meanwhile Greenland has begun settlements of its first completed apartment project in Australia, the 211-unit Lucent in North Sydney. While the developer was expecting zero defaults, 5 to 10 per cent of Lucent buyers were still awaiting funding approval from banks. (AFR, 4 Aug)
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Yuhu Group is marketing 80 apartments at its $200 million 283-apartment project “The Miller” in North Sydney. (AFR 13 July)
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Chinese property investors are eyeing fringe areas in Sydney’s southwest, topped by Edmondson Park, according to statistics from REA Group (Liverpool Leader 20 July).
A example cited was ‘New Breeze’, set to be the largest master planned community in the Edmondson Park area. Shanghai-based Dahua Group’s $1 billion project sold all 85 of its land lots in its first release in April.
Edmondson Park will have a town centre (of which construction has begun), has a recently opened Edmondson Park train station and will be close to Sydney’s second airport at Badgerys Creek.
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Chinese group YMCI is seeking development approval for it “YMCI Homebush City Garden”, slated to yield 3500 apartments in 12 towers, a town centre and plaza, school and retail space (AFR 14 July). YMCI acquired the 19-hectare site in Homebush in Sydney’s west from Goodman Group for $660 million last year.
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Poly Australia is planning to build a new A-grade office tower in the Sydney CBD after buying two adjacent buildings near Circular Quay for $160 million (The Australian 22 July).
The $160 million price was nearly 60 per cent more than what they sold for a year ago (AFR 21 July). The seller, Anton Capital, a boutique real estate investment firm led by Anthony Kingsley and Tony Martin, bought the buildings from Mirvac and subsequently benefited from higher height limits if the site was built as an office tower instead of a resi building.
The development will be the first by a major Chinese-backed global property company to develop a premium office tower in the heart of an Australian capital city. Poly’s first Australian residential project is the $200 million, 501-apartment “Poly Horizon” in Epping but the firm has a further 500 apartments pipeline in other projects.
Chinese developer Greaton (formerly Zhengtang) bought a nearby site in Epping for $60 million earlier this year with plans for a 16-level apartment tower. (AFR 14 July)
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Zone Q has bought WA’s Westralia Plaza complex for about $87m from Insurance Commission of Western Australia.
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Bank of China bought the Deutsche Asset Management’s tower at 140 Sussex Street for about $130m and will be used as its Sydney headquarters. (The Australian 7 July).
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A private Chinese developer Nuway Wy Pty Ltd is acquiring an approved $500 million residential project on the edge of the city, overlooking the Yarra River in Melbourne (AFR 25 July).
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Australian residents and business owners Hongbo Li and Liyan Song bought a mansion on the Isle of Capri (Qld) for $15.5 million. (AFR 23 July).
The chairman of Hong Kong developer Golden Horse Group, Feng Di, has bought waterfront home for $11 million, with FIRB approval. Mr Feng is the major shareholder of Golden Horse, which specializes in residential and tourism properties. The group owns Noosa Springs Golf Resort and Links Hope Island Golf Resort in Queensland (The Australian, 13 Aug)
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Chinese conglomerate Forise Holdings is planning a $1.1 billion apartment tower in the heart of Surfers Paradise. The tower — Forise’s biggest project in Australia — will become the tallest building on the Gold Coast when completed, trumping the neighbouring Q1 skyscraper. (The Australian 25 July).
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Chinese-backed Maville Group is in exclusive due diligence to sell 333 Kent Street in the Sydney CBD to a Chinese developer for $90 million. If concluded, the sale would result in a near doubling of profit for Maville after buying the office building for $47.7m in 2012. The developer subsequently obtained a DA for a 24-storey apartment tower. (AFR 24 Aug)
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China Lesso Group Holdings is buying two sites in Sydney to build a local operation that may see compete with Bunnings. (The Australian, 18 Aug). The Hong Kong-listed group, which is one of China’s top building materials and homewares companies, is buying a bulky goods site and up a warehouse development in Auburn and Prospect, in Sydney’s west.
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Hong Kong-based developer Euro Properties (via its Australian company LEPC9) is seeking to add an extra 110 apartments to the former Channel 9 site in Willoughby (Sydney north)，bringing the total number of units to 510 in the 3-hectare site. (The Australian, 8 Aug)
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A ‘critical mass’ of urban renewal resi projects is underway in the St Leonard’s NSW precinct, with Chinese backed developers active in the area.
- Apartment developer Loftex launched its Embassy Tower last week with ¾ sold by midday. (Domain 29 Aug)
- St Leonards-based developer Auswin TWT has plans for its ‘New Life’ project with about 600 apartments.
- Aqualand also owns a commercial building in the area, at 33 Herbert Street, which is currently tenanted but with residential development potential.
- Country Garden has acquired a 10-house amalgamated site in St Leonards South for about $45 million under a put and call option, unnamed sources told (AFR, 16 Aug). The private sale between the owners of the houses and Country Garden was done off market.
- Global developer Poly Australia and Chinese-backed Adelaide-based developer Greaton, (formerly Zhengtang), has also snapped up amalgamated sites.
- Chinese backed New Hope and VIC Investment Management Group jointly bought a St Leonards site for $150m last year. (AFR 19 Aug 2015)
- China’s insurance group Ping An’s real estate arm (in a jv with Mirvac) has apartment projects in St Leonards Square. (AFR, 16 Aug)
- Western Sydney-based developer Dyldam recently bought a site which has capacity for 777 apartments. (The Australian 11 July)
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Chinese developer Bridgehill Group has sold its Kimberley Clark office building, Milsons Point, for a close to $130 million to an overseas Chinese buyer. Bridgehill is believed to have made a profit close to $50 million, sources told the AFR. (AFR 27 July)
Meanwhile, a Bridgehill development at Milsons Point won the Urban Taskforce Award for the finest adaptive re-use development in Australia. The development converted an office tower into 126 apartments. Bridgehill is one of the few projects completed by a Chinese developer to have won a building award. (Mosman Daily, 11 Aug)
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Chinese conglomerate Hailiang Group is negotiating to buy a major site in Sydney for its first foray into the land and housing market. No details were disclosed but it will be a regional renewal project and will become Hailiang’s biggest development in Australia. (The Australian 15 Aug)
Controlled by billionaire Feng Hailiang, Hailiang is one of China’s largest copper tubing and alloy manufacturers and the 32nd biggest developer in China, according to the Australian.
Meanwhile, Hailiang Group has also lodged a stage one development application for the inner-Sydney Alexandria site it bought last year from the Goodman Group. The DA proposes $185 million to build a mixed-use complex, including up to 519 apartments. (The Australian, 8 Aug)
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China’s Fucheng Group has acquired a 4953 hectare rural property in Melbourne’s western urban fringe from the Baillieu family’s Woodhouse Station for about $100 million.
Fucheng Group is a privately owned company led by self-made Chinese agribusiness billionaire Li Fucheng. It previously acquired the 31,000-hectare cattle-fattening property Woodlands for $28 million from London-listed M.P. Evans. (The AFR, 9 Aug)
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The country’s biggest office landlord sees no slowing in the appetite from offshore investors for Australian property, with Dexus Property Group chief executive Darren Steinberg expecting another round of rising commercial values over the next year. (The Australian, 18 Aug)
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Melbourne-based developer Faster Enterprises has filed documents for an IPO aiming to raise up to $10 million.
The company, founded by chief executive Yong Chao Wu, is engaged in residential and commercial property development, and hotel and serviced apartment development. The market capitalization is expected to around $25m with Mr WU to control around 56% of the company. (The Australian 28 July)
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Ray White has signed an agreement with China’s largest real estate agency, Lianjia, also known as Homelink to list new and old Australian properties for sale on Lianjia websites. Lianjia has more than 6000 branches in more than 25 cities in China. (AFR 24 Jul)
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Fifth-generation Australian business Lempriere Group is in due diligence to buy Agrium’s Landmark agency and trading business in a potential deal worth about $1.2 billion.
Lempriere Group joint bought QLD’s Cubbie Station in partnership with the Chinese textile giant Shandong RuYi in 2012. Whether Shandong Ruyi will be in the potential deal for Landmark is still unknown.
Landmark has more than 105,000 customers, representing more than 75 per cent of all farms in Australia. (The AFR, 11 Aug)
Tourism-linked property deals
Visionary Investment Group will develop a luxury hotel and apartment tower on Castlereagh Street in the Sydney CBD in partnership with Chinese group United Investment.
VIG, founded by Michael Guo, is developing its own luxury hotel brand, Silkari, and opened its first hotel a 212 apartment hotel Silkari Suites in Chatswood. VIG’s Silkari also has plans for a golf resort on the NSW south coast.
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Chinese-owned Grange Group is paying about $30 million for the Balgownie Estates, a luxury resort and vineyard in Yarra Glen and Bendigo (AFR July 11).
The Grange Group is a subsidiary of Interactive Entertainment China Cultural Technology Investments Limited, a Hong Kong listed company with interests in mobile internet, money lending and property investment. Grange already owns several luxury winery accommodation venues in Victoria.
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Chinese conglomerate Nanshan Group is expanding its Australian tourism holdings, investing $350 million over the past six months including a 20 per cent stake in Virgin Australia. (AFR, 16 July)
In December, Nanshan paid $85 million for the Pullman Hotel near Sydney Airport, and is now seeking to build a 150-room hotel and 300 residential houses at its Riverside Oaks golf course.
Nanshan’s chairman Song Jianmin told the AFR that the family company, with global revenue of $16 billion last year, was seeking to build or buy hotel properties across Australia.
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Chinese developer Dalian Wanda has chosen a design proposal for its first hotel project in Sydney, anchored on the redevelopment of Gold Fields House on Circular Quay and two surrounding sites (The Australian 7 July).
The project, to be known as Sydney One, includes a 57-storey tower with 184 luxury apartments and a 26-storey hotel with 179 rooms.
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Meanwhile, Dalian Wanda and partner Ridong Group have launched the 2nd stage of their $1 billion Jewel apartment and hotel project into the Gold Coast’s market (The Australian 11 July). The partners have started selling another 102 apartments in the three-tower development. 25 per cent of the 512 luxury apartments have been sold.
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Chinese port and logistics operator Landbridge has signed an agreement with the Northern Territory government to build a $250 million luxury hotel at the Darwin waterfront. (The AFR, 9 Aug)
The construction will start next year and is scheduled to be completed by 2020. Landbridge bought the 99-year lease to the Port of Darwin from the NT government last year amid public controversy over national security concerns.
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Greenland Group has added its five-star Primus Hotel in Sydney’s CBD to the parcel of hotel assets to be injected into a proposed real estate investment trust to be listed in Singapore (The Australian 14 July). The developer has almost 30 hotels in China, and is building 40 more. It opened its first Primus Hotel in Australia (and first outside China) late last year.
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Tony Fung, the Hong Kong-born billionaire has invested $200 million+ of his own money into Australia, buying and renovating Canberra’s casino, launching a QLD resort project, Aquis, (now without a planned casino) and, most recently buying a thoroughbred stud Patinack Farm, on the Gold Coast hinterland. (The Australian, 15 Aug)
He told the newspaper of his optimism for Australia, “What most people fail to understand is the significance of this (Aus-China FTA) agreement…In about four years, most if not all of the tariffs between the two countries will be zero. What that says to me is there are great opportunities between the two countries.’
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A master plan for a $640 million integrated resort called KUR-World, has been declared a “coordinated project”, by the Queensland government. The declaration allows the developer, Reeve and Ocean Developments, to move ahead with the next stage of approval.
R&O was founded by Ken Lee, who was raised in Sydney, according to The Australian, 4 Aug. He worked for ten years in Macau as vice president of marketing for US based Wynn Resorts, KUR-World is on a 626 ha property 30km northwest of Cairns owned by Lee.
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Turtle Island, at the southern end of the Great Barrier Reef off Gladstone, is being marketed for sale with a price likely to exceed $5m. (The Australian 26 July). Another Chinese company, White Horse Group, bought Lindeman Island for $12m in late 2012, and has plans to redevelop the island into a $600m integrated resort, with the Queensland government granting the proposal “coordinated project” status.
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Daydream Island owner, China Capital Investment Group, (CCIG) has bought South Molle island in the Whitsundays, (Great Barrier Reef) for around $25 million. It also came with an existing 188- room resort and amenities. (AFR, 10 Aug)
Shanghai-based CCIG bought Daydream Island Resort and Spa last year from Nature’s Own founder Vaughan Bullivant, for about $30 million. CCIG was founded by Chuanyou Zhou. It invests in the mining industry, real estate and infrastructure.
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