Eight reasons Chinese residential developers have emerged as a major force in the Australian market: Kevin Stanley
Wednesday, 13 February 2013
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While the recent high level of Asian investment into the Australian apartment market attracts much publicity, much less is known about the impact offshore developers are having on the Australian residential market.

Many are surprised to know offshore developers are now proposing or building 20,000 apartments across Australia, with Chinese developers second only to Singaporeans in the ranking of offshore sources. This provides offshore developers with close to a 50% market share in this Australian property development sector.

But there is a link between the number of offshore developers and the high level of foreign purchases. Many Asian developers are marketing off-the-plan sales directly back into their home countries and cities through well-known and tried marketing avenues.

This high visibility through marketing and the familiarity offshore purchasers have with the product appears to be a winning formula and has helped push off-the-plan sales to a level that is ultimately supporting such a high foreign developer involvement in Australia. This is certainly the case for Chinese developers.

As at December 2012, Chinese developers have about 4,500 apartments in the development pipeline in Australia. This is a tiny number by Chinese standards, where some of the larger developers will complete about 100,000 apartments in a single year, and there are a number of developers doing that when market conditions allow.

In Australia, Chinese developers have invested at least $A350 million in sites nationally and are proposing projects so far of at least $1.6 billion. This activity is providing an important stimulus to a local property and building industry, which is at a very low point in the economic and financial cycle.

But Chinese developers are still very much in the emerging phase in Australia, behind the Singaporeans, who have been the pioneers of offshore developers here and successful ones at that. Singapore-based Frasers Property stands out as the single largest offshore developer to date, with large and high-profile projects such as Central Park in Sydney and the Frasers Landing/Queens Riverside projects in Perth making a bold mark on the local scene.

Of the 4,500 apartments in the Chinese developer pipeline, 72% are still classified in the broad “planning” phase, which could mean sites have only recently been purchased with plans still being developed (and often final apartment numbers still unknown), with others still going through the development approval process. Singaporean developers have just 39% of proposed stock in the “planning” phase and 44% (2,600 apartments) under construction.

Of the Chinese pipeline, 700 apartments are presently under construction and around 550 recently approved.

The Chinese component of the offshore developer trend in Australia comprises 17 projects of the 58 presently monitored in total. Interestingly, of these Chinese-backed projects, 74% by apartment numbers are in Melbourne, with the percentage of foreign-developed apartments in Melbourne at a still-strong 48%.

Access to sites, a lower general site cost per square metre, a more accessible planning system and the strong cultural/education connections appear to have driven this higher-than-average representation of Chinese-developed apartments in Melbourne. Strong growth in visitor arrivals from China to Melbourne though increased direct flights appears as evidence of the strengthening links.

The Gu family’s AXF Group is the most active of the Chinese developers in Melbourne, with at least 2,300 apartments in the pipeline, including the 3.3-hectare former Kinnears Ropes site in Ballarat Road, Footscray, which could yield as many as 2,000 apartments.

The other prominent location for Chinese developers is the Gold Coast, which represents 12% of the total Chinese-backed proposals. The massive three-tower Jewel project dominates this interest. The AU$1 billion project recently received state government approval and may kick off within the next 12 months. The project will include a six-star hotel and two residential towers.

Jewel's northern tower will have 215 luxury apartments over 41 levels; the central tower will be a six-star hotel with 300 suites and apartments over 45 levels; and the beachfront tower will have 108 premium residences over 35 levels. There will also be office and retail space and a host of resort facilities.

Jewel is being proposed by the Zhuhai Ridong Group and is likely to be completed by 2016, a time when the current oversupply of apartments on the Gold Coast is expected to be well and truly absorbed. Chinese developer Yan Jian is also active in the Gold Coast market.

Showing that Chinese developers are not just active in the larger Australian cities, the Datong Investment and Development Group is proposing two schemes in Adelaide, both in the CBD. The 123 Flinders Street scheme is particularly notable for its very bold design and is proposed to be the tallest building in the city at 39 storeys, a height only recently allowed under new planning controls. The same developers are also proposing the Aria on Gouger project on Gouger Street.



It’s perhaps surprising Chinese developers are not more active in Sydney, given the size of the city, its popularity with Asian visitors and the large number of Chinese apartment buyers in that market. Only 6% of Chinese-backed apartments are actually in Sydney, compared with 35% overall for offshore developers. There is further scope for Chinese developers to move into the Sydney market, but for now, the Singaporean-based groups have established the lead position among the offshore developers.