Shifting local market and regulatory conditions resulted in a dramatic slowdown in outbound Chinese investment in Australian commercial property last year, dropping further from its 2015 peak, according to Cushman and Wakefield’s latest annual investor intentions report.
Total Chinese outbound investment in Australian commercial property dropped from $6.97bn in 2016 to $2.83bn in 2017, representing a 60% decline. Meanwhile, total investment last year comprised $1.97bn invested in standing assets and $853m in development sites, a decline of 60% and 72% respectively.
Despite the weaker investment levels, Australia remains a firm favourite among mainland Chinese investors, ranking second for the third consecutive year behind the United States.
In contrast, investment from Hong Kong surged by 20% in 2017, rising from $918m to $1.1bn. This is expected to increase further this year as mainland Chinese investors seek to reallocate capital via Hong Kong.
According to a recent survey of top mainland Chinese real estate investors overseas (MCREIO) conducted by the Cushman and Wakefield research team, sentiment among this group towards Australian commercial property dropped from 22% in 2016 to 17% in 2017.
“This was in line with the decrease in overall investment, however it still placed Australia in second position overall – behind the 31% of investors that intend to invest in the United States (also down from 44% in 2016),” Cushman and Wakefield said.
While there is expected to be heightened scrutiny of offshore investment by the Chinese government, the research shows that only 50% of mainland investors have been significantly impacted by the latest curbs, with the remaining half reporting little to no impact.
“While we have seen a significant drop in China outbound investment into Australian real estate over the past year, Australia remains as one of the top global destinations of choice for Chinese investors,” said James Quigley, Cushman and Wakefield’s head of capital markets Australia and New Zealand.
“Top Chinese investors are telling us that they still greatly favour the Australian market, but with regulatory changes and fierce competition for top assets, deal activity is expected to weaken. That said, we are seeing rising investment volumes from Hong Kong with further growth expected as Mainland Chinese investors look at alternative avenues to invest.”
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