Above:The number of Chinese investing in Australian property will not decline.

The number of Chinese investing in Australian property will not decline but the pace of their investments will slow, say property experts.

The structural changes and slowdown in the Chinese economy, Beijing’s tough stance on corruption and capital control, and fewer cheap deals, are forcing the Chinese to rethink the timing of their investments in Australia, Savills and JLL in Hong Kong said.

“They are taking stock but they are not putting the brakes on. It is simply a deferral – a “wait and see”,” Savills Hong Kong’s senior director Simon Smith said.

“It’s not a long-term trend. They certainly grabbed the opportunities when they were there, but there are limits.”

In 2013-14, China overtook the United States as the largest foreign investor in Australia at $27.7 billion, said the Foreign Investment Review Board. Property investments accounted for nearly half of that at $12.4 billion.

But a recent note by Credit Suisse’s analysts Damien Boey and Hasan Tevfik said Chinese demand for global property, including Australia, had fallen in 2015.

JLL Hong Kong’s head of research Denis Ma disagreed. “Investments will moderate not fall.”

He said the Hong Kong example demonstrated the Chinese would “find a way around a barrier”, albeit slowly.

“When Hong Kong imposed a 15 per cent transaction tax on foreign investments, it did not deter the Chinese. You still see them in the market,” he said.

Above: Hong Kong imposed a 15 per cent transaction tax on foreign investments, it did not deter the Chinese.

Institutional players such as property developers and conglomerates which have a presence in Australia such as Dalian Wanda, Country Garden and Greenland, go to Australia to diversify their businesses.

Sinking all their money into China is putting all their eggs into one “emerging market” basket, Mr Smith added.”They want investments in deep, mature, liquid cities such as London, New York, Sydney … to diversify risks.”

“They will pay the money. They are pretty thick-skinned but their problem is availability. When they see less availability, they will refocus.”

Country Garden which builds mega-townships in southern China and is building apartments in Sydney and Melbourne, sets aside an overseas investment budget.

“The government encourages us to take our capital out,” chief financial officer Wu Jianbin said.

Above:Wu Jianbin said the government encourages us to take our capital out. (Photo from South China Morning Post)

But Mr Wu said Country Garden will develop in Australia cautiously, focusing on the main markets of Melbourne and Sydney.

Other companies such as the state-owned property enterprise, China Vanke, have instead decided to hold off development in Australia, sources have said.

Retail investors also want to buy property in Australia but Beijing’s push to stamp out corruption is slowing them down.

In late September, China’s central government tightened restrictions on cash withdrawals from foreign ATMs in an attempt to prevent capital outflows.

“Folks taking money out of China are not so much concerned about the housing market cycle, they are more concerned about getting money out. Besides, Sydney looks cheap compared to its nearest overseas market, Hong Kong.” Mr Ma said.

Above:Country Garden will develop in Australia cautiously, focusing on the main markets of Melbourne and Sydney.

While a slowdown is expected, the new year will see fresh Chinese interests in hotels and intellectual property, Mr Smith added.

CBRE Asia-Pacific’s executive chairman Rob Blain said there could even be new players such as “powerful second-tier Asian family investors looking for core, prime assets”.

“Chinese investment overseas will be a fact of life for the next 20 to 30 years,” Mr Smith said.

Source: Australia Financial Review