Chinese developers and retail buyers are still looking for opportunities in Australia despite China's strict curb on capital transfers, but they will approach their investments differently this time, new reports by JLL and Juwai show.
Chinese developers will now expand into Australia with a large "marquee" project to quickly shore up market share, rather than slowly building a pipeline wih smaller projects, JLL's The Future of Chinese Residential Developers in Australia says.
"While the residential cycle in Australia is quite mature, there are sufficient opportunities available which are desirable to Chinese developers coming from a more volatile market. As the next wave will likely consist of developers who differ from typical operators in the Australian market, the industry could face a level of disruption, placing pressure on local developers to retain their market share," JLL says.
"Using a marquee strategy requires a long-term investment into a market. The strategy requires the developer to adopt an aggressive pricing strategy for acquiring a landmark site which comes with the risk of lower than benchmark returns."
Citing examples such as China Vanke and Wanda, JLL says the next wave of Chinese residential developers coming into the Australian apartment market are likely to have more capital and hail from China's tier 1 cities.
China Vanke, one of China's mega developers, has yet to make a move on Australia, but in San Francisco it has targeted large flagship projects such as the 656-unit "Lumina" apartments with a local joint venture partner. Vanke also focused on areas with large existing Chinese communities.Dalian Wanda also launched into Australia with great fanfare with Circular Quay, Sydney and the Gold Coast."
The effects on local developers of the marquee expansion approach are two-fold. Chinese developers seeking marquee sites are likely to be more competitive than local developers in their underwriting assumptions in order to be the successful buyer," JLL says.
"Potential changes in market conditions may lead to divestment of marquee sites which creates buying opportunities."While capital restrictions have increased in China, JLL says Chinese developers in Australia can still count on "an increasing buyer pool of high-income Chinese investors", which is forecast to more than double over the next decade.Chinese online property portal Juwai's latest survey of Chinese buyers shows that only 25 per cent of buyers consider money transfers as their biggest challenge, and are instead more concerned with "navigating legal systems" and property selection.
Su-Lin Tan of AFR