Significant Decline in Chinese Investment Reported

According to Knight Frank’s Head of Research and Consulting, Australia, Mr Matt Whitby, Chinese investment in Australian showed a 37% decline YoY decline (Year on Year) in 2016 due to the absence of mega deals secured in 2015. 

The US is now firmly established as the most important destination for Chinese capital, having attracted US$5.1 billion worth of Chinese investment in H1 2016, up 21% YoY. 

Paul Hart, Executive Director, Greater China at Knight Frank said, “Meanwhile, Chinese investment in the UK showed an impressive YoY increase of 75% in H1.  The interest in the British capital has not diminished even after the Brexit vote as the market saw a number of major transactions taking place since then.

However, Mr Whitby reports that there is still a strong appetite for en-block commercial properties in both Sydney and Melbourne, attracted by rental growth supported by strong tenant demand and supply shortage. 

“In Australia, with the absence of mega-deals such as last year’s CIC’s record breaking purchase at US$1.8bn for an office portfolio, the volume of office deals dropped 65% and hotel deals dropped 42% YoY. Investment in development sites stabilised. Nonetheless, Chinese and other Asian capital remain drawn mainly to Sydney and Melbourne’s office markets given their short supply and rental growth prospects. One important observation is that Chinese developers are now looking to diversify into income producing properties.”

China is still by far the biggest foreign buyer of Australian property, spending $24.3 billion in 2014-15, more than triple the United States and six times the outlay from Singapore.  However, recently introduced government restrictions on foreign investment and legislative changes, coupled with the increasing difficulty of getting large amounts of cash out of China, are impediments for investors. 

It will be interesting to see how 2017 unfolds with the change of government in the United States, the continued after effects of Brexit…it’s a whole new ball game out there, and it could ultimately strengthen confidence from the Chinese in Australian property investment, particularly with an American President-Elect promising to make significant changes across of a spectrum of issues, that include foreign investment.

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