Foreign Appetite For Commercial Property On The Rise
While Chinese demand for Australian residential property is cooling, due to tighter restrictions on investment activity in both Australia and the PRC, the exact opposite is true for Australian commercial property.
Foreign demand for hotels and office assets are set to climb to 21.9% and 19.2% respectively, according to the ANZ/Property Council Survey for the March quarter 2018. In contrast, offshore buyers in residential property are projected to drop from 18.5% to 15.9% nationally in the first quarter of 2018.
Foreign acquisition of hotels and offices, as well as retail and industrial property, are expected to rise, with Victoria tipped to lead in all sectors except industrial, where New South Wales still leads.
Foreign buyers in Victoria will be ramping up their acquisitions of hotels, with the number skyrocketing from 19.5% to 28.6%. Foreign buyers are also forecasted to acquire 22.6% of offices, up from 17.4%.
In NSW, more than 26% of hotels were acquired by foreign buyers in the December quarter of 2017, though this is expected to drop to 23.6% in the March quarter of 2018.
“Over the past two and a half years, there has been a steady increase in commercial property investments by Chinese high net worth individuals and investment partnerships. Commercial property is regarded by these investors as more stable than residential,” said Carrie Law, CEO and board director of Juwai.com, a Chinese-language international property website.
“From them, buying Australian commercial real estate is like purchasing a bond that pays a near-guaranteed return year after year. These are also savvy investors who is some cases … can bring their expertise into redevelopment or otherwise create greater value in the commercial properties they acquire.
“The long-term investment drivers have not changed. There is still a strong need in Australia for foreign capital. There is a growing number of Chinese investors, and many have not yet made their first investment in Australian property. There is an increasing global appetite by Chinese developers and construction companies. And new types of Chinese investment vehicles are being created almost by the day, with private equity funds, investment consortiums and family offices getting into the mix.”