Chinese Investment, Where Is It Going?

June 27, 2016

 Globally, Australia remains the second (second to the USA) most favoured country for accumulated Chinese investment in the world between 2005 and 2015. The University of Sydney states that the Chinese Outbound Direct Investment (ODI) for Australia was $15.09 billion AUD being a 32.9% increase from last year’s investments being $9.46 billion AUD[1]. With this enormous amount of money entering Australia, it poses the question, where exactly is all this money going?

 

Being widely known, the sector that attracts the largest proportion of Chinese investment is real-estate. The real estate sector accounted for 45% of all Chinese investments in 2015. Interestingly, 49% of all Chinese purchased real-estate in Australia was located in NSW. This would have no doubt been driven by the previous couple of years’ exceptional growth in the market.

 

Reports show 58% of real-estate investments are for apartments; this is primarily due to the fact that most of the urban Chinese live in apartments, which shapes their choice in asset.

 

 

 

On top of this, the majority of Chinese buyers are looking for 2-3 bedroom apartments over 1 bedroom; as liveability is an important factor for the investors. This trend is primarily driven by migration and proximity to local elite educational institution[2].

 

Although residential is the major property class invested by the Chinese, commercial properties are still favoured by Chinese institutional investors. Serviced apartments make up 52% of the Chinese preferred commercial property, followed by 31% whom prefer Hotels & resorts. The Chinese have a better understanding of commercial property over residential as it its easier for buyers to purchase and manage.

 

 

 

This over seas investment has played a small part in the excellent market performance of both Sydney and Melbourne over the past market growth phase. It is very interesting to now monitor where attentions are being directed in order to determine future market movements. There has been a considerable reduction in over seas investment in both NSW and VIC in 2016 so far with a significant increase in attention on the QLD market.

 

Knowing exactly what markets and property types the Chinese money continues to flow into gives us a better idea of things to come.

 

 

 

 

[1] http://demystifyingchina.com.au/reports/demystifying-chinese-investment-in-australia-april-2016.pdf

[2] investorist, China International Property Outlook, 2016

 

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