Chinese investment in Aussie property: Where's the money coming from?

by AB02 Oct 2013

Chinese commercial property investment in Australia is reaching new record highs, according real estate group Colliers International – and the majority of the money is coming from four sources.

China’s share of foreign direct investment in Australia has tripled between 2007 and 2012 and preliminary figures suggest that number could stretch once more in 2013.

"In 2012, Chinese outbound property investments around the world set a new record of around US$4 billion, a trend that is continuing into 2013," says Malcom Tyson, state chief executive, NSW for Colliers International. 

"Their appetite for Australian real estate assets has grown significantly due to the relatively sound Australian economy, close proximity to China and regulatory changes from both the Chinese and Australian governments which have made it easier for them to invest their wealth in Australia."

According to Tyson, Chinese investment in the Australian commercial property market is largely coming from the following four major sources:

1. Banks and financial institutions

“Major Chinese insurance companies have been seeking offshore investment opportunities since the Insurance Regulatory Commission (CIRC) lifted its restriction on them investing in overseas property last October.  Developed countries have been of particular interest to them.”

2. Developers with global ambitions

“In recent years, Chinese real estate developers have extended their investment footprint into major gateway cities, such as London, New York, San Francisco and Sydney.  Besides diversifying from the domestic Chinese market, which is considered to be more volatile and highly regulated by the government, they can gain prominence as national brands that are becoming international, thereby adding to their domestic credibility.”

3. Large state-owned enterprises (SOEs) and China sovereign wealth funds (SWFs)

“China's large SOEs and SWFs are also joining the foray by investing in global real estate markets.  With limited opportunities at home, and their increasing purchase power with the strengthening Chinese Renminbi, overseas property assets are highly attractive.”

4. High Net Worth individuals (HNWIs)

“Overseas property investments are not only attracting capital from Chinese institutional investors. A growing number of wealthy Chinese HNWI's are snapping up overseas residential properties too.  Like Chinese corporate and institutional investors, they are seeking such investments in view of the slowdown of domestic growth and, more importantly, the fact that China still offers them very few channels through which they can invest their wealth.

While the increase in Chinese investment in the Australian residential property market has been widely reported, statistics show that Chinese investors are putting their money into a wide range of commercial property assets. “