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Above:Chinese capital is pouring into the Brisbane and Gold Coast property markets.

Chinese capital is pouring into the Brisbane and Gold Coast property markets at a rate “never seen ever before”, prompting law firms to expand their offerings, one partner says.

Sydney and Melbourne have seen property prices shoot through the roof in recent years, partly as a result of growing inbound investment from China.Now Brisbane is seeing a spike in interest from mainland China, with investors engaging in bidding wars over development projects of unprecedented scales.“We’ve seen a massive up swell of inbound investment in south-east Queensland from mainly Chinese investors and development companies in the last six months in particular,” said Andrew Johnson, who heads up Mills Oakley’s Brisbane property team.

Above:Andrew Johnson said they seen a massive up swell of inbound investment in south-east Queensland from mainly Chinese investors and development companies in the last six months in particular.

Chinese purchasing intent increased 17 per cent in Q2 2015 compared with the same period last year, according to Juwai.com.“The Melbourne market was the first to be hit, then the Sydney market and Brisbane is always a bit slower and lags behind [but] we’re certainly in the middle of the wave now. I can’t see this slowing down up here for the next 18 months,” said Mr Johnson.

This “phenomenal” upturn has had a “very positive impact on workflow”, he continued. Firms like Mills Oakley are starting to position themselves in the market to get as much inbound work as possible.“I’ve been forced to seek out the best people I can find who have got experience in dealing with Chinese clients,” said Mr Johnson.Mr Johnson said Chinese investors are going head-to-head over development projects with Australian industry heavyweights such as Metro Property Development, Meriton and Mirvac.The competitive market is forcing Chinese buyers to pay “top dollar” compared to what the Australian market would pay.

Above:Q1 is a skyscraper in Surfers Paradise that holds the record as the tallest building in Australia.

The site of the former Iluka tower on the Gold Coast, for instance, has been acquired by Chinese group Forise Holdings, which plans to build a $1 billion resort with 693 luxury apartments.“That’s enormous for the Gold Coast to get a tower like that being built. It’s a billion-dollar tower. They haven’t done towers like that ever – even Q1 wasn’t that big,” said Mr Johnson. (Q1 is a skyscraper in Surfers Paradise that holds the record as the tallest building in Australia.)Similarly, a 221-apartment tower in Brisbane worth $120 million was recently approved as a joint-venture between Property Solutions and China-based Chiwayland International.

However, the profile of Chinese investors in Queensland is different to those in other parts of Australia, he continued. Chinese buyers are increasingly interested in living in the properties they purchase.“There are a large number of middle-band, high-net-worth Chinese … wanting to move close to the sun, the great outdoors,” said Mr Johnson. “It’s a nicer place to live up here sometimes compared with Melbourne and Sydney … and I suppose we are a closer destination to China.”

Above:. Chinese buyers are increasingly interested in living in the Queensland properties they purchase.

The movement of capital from Asia to Australia has been encouraged by recent free trade agreements, according to Mr Johnson.“The Australian government is obviously indicating to the overseas market that we are open for business.”Mr Johnson doubted that the flow of capital to Australia was a response to a crackdown on corruption by the Chinese government, as has been suggested in the press.“I’m not an expert in forensics and money laundering but we’ve got one of the safest banking systems in the world in Australia,” he said.“We have high security … in terms of money laundering and that kind of thing so it would be difficult for that to take a foothold here like it has in some other countries.”

Source: Lawyers Weekly

A GLOBAL real estate sales organisation says more overseas interest is heading to Australian shores than ever before.

Century 21 has witnessed a surge in visitors to its Australian website from the developing BRICS nations of Brazil, Russia, India, China and South Africa.

Data collected over an eight week period in May, June and July shows that BRICS nations accounted for half of the top ten sources of growth in online traffic when compared to the same period last year.

“I think it may come as a surprise to many people that while there is increasing online interest from China in Australian property, the top three sources of website traffic from overseas are the USA, UK and New Zealand,” said Century 21 Australasia Chairman and Owner, Charles Tarbey.

“China placed eighth as a source of traffic to our Australian website and fourth in terms of growth in visitor numbers.

“I believe the key take-out here may be that there is interest in the Australian property market from all over the world – not only Asian buyers.

“That being said, it is clear from the data that developing nations are becoming increasingly interested in Australian property,” said Charles Tarbey.

Website traffic from Russia expanded the most (252%) with traffic from Brazil growing by the second highest amount (104%).

Online visitors from the Philippines, China, Italy, Hong Kong, Thailand, South Africa, Indonesia and India rounded out the list of the top ten fastest growing sources of visitors to the Century 21 Australia website.

Source: The Queensland Times

The Asia’s Silicon Island Penang is currently home to Dell, Motorola, Hitachi, Bosch, and Intel plants, with more on the way.  Penang is also expected to attract RM7 billion of Foreign Direct Investments (FDIs), expanding from the electronic industry to business process outsourcing (BPO) operations creating thousands of new jobs.  High speed rail is also expected in the pipeline by year 2020.

Golden Emperor, in partnership with Malaysia’s Top 10 developer E&O Berhad, hosted a seminar on discovering Penang for investment on 15 – 16 August. At the event, E&O’s exclusive 21-acre seafront project, the Quayside was showcased, and over 100 clients attended.

Above: Hong Kong investors attended to learn more about investing in Penang

Above: Fred Poon from Golden Emperor Properties (Mongkok) provided a presentation on investing in Penang

Above:The building model of Quayside, a project by E&O Berhad in Penang

The tourism industry is one of the major catalysts of economic growth. Over the years, the state has tremendously drawn a high number of visitors both nationally and globally, particularly after the inscription of George Town as the Unesco World Heritage Site on the 7th July 2008.

Above:George Town as the Unesco World Heritage Site on the 7th July 2008.

The international and domestic arrivals of tourists at Penang International Airport saw an increase of 10.1% in 2014 compared with 2013 with international arrivals registered at 2.571 million in 2014 and 2.425 million in 2013 while domestic arrivals in Penang also increased to 3.465 million in 2014 from 3.061 million in 2013.

Malaysia is currently ranked among the world’s top health tourism destinations thanks to its affordable, high quality medical treatment, with over 60% of health tourists making Penang their preferred destination. The rise of health tourists in the recent years has contributed strong revenue for Penang’s health tourism sector. For health tourism alone, Penang generated RM370 million and RM320 million in revenue in 2013 and in 2012, respectively. Malaysia is targeting to reach RM9.6 billion in revenue from medical tourism by 2020.

Malaysia’s international business tourism visitors have increased by estimated 140% since 2003. Malaysia Convention and Exhibition Bureau (MyCEB) is targeting a growth of tourist arrivals.

In line with MyCEB’s goal, Penang will have two Meetings, Incentives, Conventions & Exhibition (MICE) once the Subterranean Penang International Convention and Exhibition Centre (SPICE) completes in 2015 and the Penang Waterfront Convention Centre (PWCC) in 2017.

Both will drive up demand for hotel rooms in Penang as the number of visitors is expected to increase. As at to date, there is a shortage of hotel rooms.

Above:Owing to the high flow of domestic and international tourists to Penang Island, it needs to have ample supply of hotels to cope with the increasing tourism growth.

There are only 14,000 rooms as of last year. Owing to the high flow of domestic and international tourists to Penang Island, it needs to have ample supply of hotels to cope with the increasing tourism growth.

There are eight (8) hotel developments located on Penang Island that are either under construction or yet to be officially opened for operation. Upon completion, these hotel developments will contribute 1,598 rooms of different types, rates, sizes and designs with different themes.

Generally, hotels on Penang Island recorded an average occupancy rates between 55% and 65% over the last 5 years. In term of occupancy rate by type, City hotels is found to achieve the most outstanding performance with an average occupancy rate of about 70% over the last 5 years. One of the main reasons that contributed to the success of City hotels is due to the inscription of George Town City as the Unesco’s prestigious World Cultural Heritage Site on 7th July 2008.

For Beach hotels, it recorded an average occupancy rate of 63% over the last 5 years. Demand for Beach hotels increase continuously from 2009 to September 2013, recording at 58%, 59%, 63%, 65% and 68% respectively.

Source:Henry Butcher Real Estate Penang

Above: Under George Town Transformation Programme (GTTP), would be transformed from a moderately functioning urban centre into a model 21st century “secondary” city

Key Economic Indicator

Penang’s Gross Regional Product (GRP) was mainly contributed by the manufacturing and services sectors. Manufacturing accounted for 50% of the GRP shares while 46% was from the services sector. The manufacturing main sub-sectors include electrical and electronic while services include hospitality, medical tourism and outsourcing of support services. The services sector is expected to surpass the manufacturing sector soon and is projected to grow by 48.6% in 2015. Unemployment rate remained stable at less than 3%. Penang’s population stood at 1,638,400 as at 2013 and 2/3 of Penang’s population is less than 40 years old.

Malaysian Currency

The Malaysian Ringgit currency continues to weaken and has slid to 17-year lows against the USD as at 30 July 2015. Year-to-date, the ringgit is the worst-performing currency in Asia with a lost of 8.4% against the USD. The downward pressure on the ringgit is due to external and domestic uncertainties. A local forex researcher forecasted that the lowest the ringgit would go is 3.85 against the USD. Impact of Goods & Services Tax (GST) Goods & Services Tax (GST) under the Budget 2014 which replaced Sales Tax Act 1972 was implemented on 1 April 2015. The sale, purchase and rental of residential properties will not attract GST. However, any sale, purchase and rental of commercial & industrial properties will be taxed at 6%. Under the GST tax regime, consumers have been paying more for food, products and services. In view of the overall cost increases in property development, most analysts are of the opinion that this will have an eventual impact on property prices in the primary market. Commercial properties which attract GST are now beginning to feel the brunt of its effect.

Above:The Malaysian Ringgit currency continues to weaken and has slid to 17-year lows against the USD.

Base Rate

Effective Jan 2015, the new reference rate is known as Base Rate (BR). The latest BR as at Jan 2015 is between 2.96 to 4.02% while effective lending rate hovers between 4.45 to 4.8%.

Non-Performing loan

The percentage of non-performing loan (NPL) reflects the health of the banking system. A higher percent of such loans means that the banks are having difficulty to collect their interest and principal on their credits. The total housing loan approved this year was RM1.937 million as at May 2015 compared to RM1.723 million during the same period in 2014, an increase of about RM0.214 million.

Penang Property Market

Penang property prices have been on an upward trend since recovering from the dip in 2009 with 2% increase from 2013 to 2014 with total value of transaction recorded at RM13.49 million and RM13.77 million respectively. The period of Q1 2015 saw a slight drop from RM3.578 million compared to RM3.776 million in Q1 2014. The total volume of transactions increased slightly with 24,346 units of transactions recorded in 2013 compared to 25,555 in 2014. Q1 2015 registered lower volume at 5,637 units compared to 6,416 units on the same corresponding period last year.

The residential sector remains the most active at 68% of the total volume of property transactions as at Q1 2015. The shift in investment from residential saw transaction volume for commercial sector recorded at 8% in 2014, an increase from 9% compared to last year while the development land sector remained the same at 7% for both years.

2014 saw an increased in total value for residential sector from 53% in 2013 to 55% while development sector saw a drop from 23% in 2013 to 20% in 2014. The total value for commercial sector remained the same at 13% for both years.

Penang Residential Market

The year 2014 registered a slight increase of 1,026 units with a total volume of 247,251 units compared to 246,225 units in 2013. The total value as at 2014 also increased to RM82.059 million from RM72.060 million in 2013.

Q1 2015 recorded 3,834 units compared to 4,291 units in Q1 2014, a drop of 0.12% while Q1 2014 and Q1 2015 registered RM1.883 million and RM1.547 million of total value of transactions respectively, a drop of 2% during the same corresponding period.

There is a total supply of 206,000 units on Penang Island of which 80% are strata-titled while 20% comes from landed property.

In terms of supply, on Penang Island, 62% of the properties are less than RM250,000 while properties above RM1M is only 8%.

What is the outlook for Penang’s Real Estate Market in H2 2015?

• Penang has a charm of “outstanding universal value” that showcases George Town’s unique historical and architectural buildings.
• George Town, under George Town Transformation Programme (GTTP), would be transformed from a moderately functioning urban centre into a model 21st century “secondary” city
• Desirable property is limited in supply.
• Demand from local & international buyers is expected to consolidate.
• Challenging market amidst global economic uncertainties.
• Property prices are currently stable.

Source：Henry Butcher Real Estate Penang