Chinese investment in real estate grows to $32b: FIRB


Chinese investors topped the list of foreign investment approvals for the financial 2016, and have pledged to invest $47.3 billion in Australia, mainly in real estate, the latest Foreign Investment Review Board annual report shows.

The figure is similar to the previous year when $46.6 billion in approvals was awarded to Chinese investors.

While this puts China far ahead of the second-biggest foreign investor, the US, which has had $31 billion in investments approved, the US still owns four times more Australian assets than China does, Chinese property group said.

Of China’s $47.3 billion, $31.9 billion will go into real estate mostly in residential development assets.

FIRB said investment in development assets, such as new dwellings, vacant land and redevelopment of existing residential property that increases the housing stock was 85.4 per cent of all residential approvals.

Most of these approvals were in NSW and Victoria where demand for housing in Sydney and Melbourne continues to grow.

In contrast, approvals to buy established dwellings have fallen 36 per cent from 2014-15, as Treasury ordered the divestments of wrongful foreign housing acquisitions.

These statistics, as well as an analysis from Treasury last year, show that foreign investment approvals and investments in residential property do not push up the price of housing.

“While Melbourne received more foreign investment approvals than Sydney, price growth in Sydney was much stronger than in Melbourne,” the FIRB report says.

“Every Chinese dollar invested landed in the pocket of an Australian somewhere. Chinese investment translates directly into jobs, tax revenue, economic growth and new housing construction. There’s nothing about it that any reasonable person can object to. Frankly, China has been a godsend for Australia these past 10 years,” Juwai chief executive Charles Pittar said.

Compared to Chinese investors, US investors will only spend $8.2 billion in real estate. Most of the US approvals are for financial and insurance assets worth about $10 billion. This was a big leap from the previous year when US investors applied to spend just under $2 billion in financial services and insurance.

High value commercial property approvals increased by more than $10 billion.

For the third year in a row, China was the largest source of approved investments and while the US was second, it was the largest investor in non-real estate sectors.

There were foreign interests in 13.6 per cent of agricultural land by area as at June 30 last year. The two biggest investors in agricultural assets are the UK and the US.

Despite that, Chinese investors made big headlines after the federal Treasurer Scott Morrison rejected the sale of S.Kidman & Co, Australia’s largest private landowner to a majority Chinese consortium. He later approved a sale to a joint venture led by Gina Rinehart and her Chinese partner, Shanghai CRED.

In other sectors, Dutch interests in mineral exploration and development assets shot to $15.2 billion from nothing the previous year, due to the Royal Dutch Shell’s takeover of BG Group Plc, which included Australian assets.

Investors from the United Arab Emirates ranked higher this year due their interest in the 99-year lease of TransGrid. Investors from the United Arab Emirates also received approval for a number of large value investments in commercial real estate, FIRB said.

Overall, total foreign investments approved for 2015-16 was up 29 per cent to $247.9 billion. FIRB applications also raked in $78 million in fees for the Australian Taxation Office.

By Su-lin Tan

Financial REview



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