Chinese Buyers

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<img src="https://counter.theconversation.edu.au/content/66750/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Gina Rinehart has partnered with a Chinese company to buy the giant Kidman pastoral empire, after two previous bids by Chinese buyers were rejected by the federal government.
Under the proposed sale Hancock Prospecting and Shanghai CRED are forming a joint venture company, Australian Outback Beef (AOB), owned 67 percent by Hancock and 33 percent by Shanghai CRED.
The sale is worth a net $365 million after the carve out of Anna Creek station in South Australia, valued at about $14-$18 million.
Of three bids for the Kidman land, this is the first with majority Australian interests. The privately owned Shanghai CRED was involved in the earlier bids, both of which were knocked out by Treasurer Scott Morrison. It has recently bought land in Western Australia.
But the offer must run the gauntlet of the federal government’s foreign investment regime which means being examined by the Foreign Investment Review Board, with approval or rejection then up to Morrison. It is also subject to various Chinese government approvals.
It is thought this bid, with its majority local ownership, is likely to be better placed than the earlier ones to navigate the hurdles.
Its 33% foreign ownership is marginally below the 33.9% present foreign ownership – mostly British - of Kidman.
Gina Rinehart is also very close to Deputy Prime Minister Barnaby Joyce, who has been a critic of the Chinese push for Australian land.
The offer is conditional on the sell off of Anna Creek and the Peake, an associated property, to other Australian grazing interests.
Anna Creek overlaps the Woomera test area and security considerations were key to the rejection of the first of the two previous bids, although the total amount of land involved was also a major factor.
The rejection of the second bid came shortly before the federal election, when Chinese investment was seen as an issue.
The Kidman empire has 19 individual properties operated as 12 enterprises, including 10 cattle stations, a bull breeding stud and a feedlot.
It has pastoral leases covering 101,000 square kilometres across South Australia, Western Australia, the Northern Territory and Queensland, and an average herd carrying capacity of 185,000 cattle.
Rinehart, chairman of the Hancock group, said: “Kidman is an iconic cattle business established more than a century ago by Sir Sidney Kidman. It is an operation founded on hard work and perseverance by an outstanding Australian, and it is an important part of Australia’s pioneering and entrepreneurial history.”
The CEO of Hancock, Garry Korte, said the quality of the Kidman herd and channel company properties would complement Hancock’s existing northern cattle properties, and align well with Rinehart’s plans to build a diversified cattle holding in Australia. The Hancock family started their first cattle station in north west Australia.
Principal of Shanghai CRED, Gui Guojie, said partnering with leading local business Hancock had already proved a productive approach and he looked forward to having the opportunity to work with Hancock through the Kidman investment.
The Kidman business went on the market nearly 18 months ago and more than 600 interested parties have held discussions with the sales manager Ernst and Young.
Michelle Grattan is professorial fellow, University of Canberra, and author for The Conversation. She can be contacted <a href="https://theconversation.com/profiles/michelle-grattan-20316" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

Scott Morrison to rule on Hancock-Chinese bid for Kidman cattle empire

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GUEST OBSERVER
Marketing to Chinese consumers is a hot topic for all businesses across different sectors.
 A common misperception for businesses is that they need to be in China to sell to Chinese consumers. This has prompted developers and agencies to invest in roadshows, exhibitions and seminars at China’s prime real estate and events, only to result in expensive failures.
With the growing Chinese population in Australia, sellers need not look too far in reaching out to their prospective Chinese buyers. At ACproperty.com.au we believe there are 3 reasons why you should begin your marketing locally before embarking on overseas marketing investments.
1. Chinese buyers rely on word of mouth recommendations from Australians
The most effective and efficient way of marketing to mainland Chinese buyers is to build a loyal following among the local Chinese communities, who can endorse your brand. Most prospective mainland Chinese buyers have friends and relatives living in Australia. This is one of the biggest reasons that influences their decision to migrate to Australia. The first thing most of them will do is to speak their relatives living in Australia, to understand which area is suitable for their lifestyle and to gain recommendations on property investments, developers or real estate agents.
Glen Waverly High and Balwyn High are classic examples on the success of word of mouth recommendations. None of the schools have advertised in China, yet every prospective mainland Chinese buyers would have heard of Glen Waverley and Balwyn School zones.
Speaking from experience, ACproperty.com.au has been enjoying tremendous success as evident from our 65 percent growth of inbound traffic from China for the past 3 years, while mainly concentrating our marketing efforts on the local Chinese communities and student associations.
2. Chinese migrants in Australia are buying properties too
A significant amount of our web traffic is from high quality leads in Australia. Agents and developers alike will find a group of high conversion Chinese customers right under their noses. The value in targeting this group grows exponentially once we realise that this is the same group that will be recommending your brand to their peers overseas.
3. Chinese buyers want authentic and unbiased local property information
A consistent piece of feedback we receive from our users is that when buying Australian property, they prefer to access an Australian site (vs. Chinese-based sites) so they can access vital local Australian market experience. Our Chinese Concierge Team are constantly receiving calls from buyers wanting to validate information they receive from Chinese sources, which they perceive as biased or incomplete.
To successfully capture the Chinese market, developers and agents should first market to the local Chinese communities, cultivating a loyal following before expanding into overseas marketing. Not only are they potential buyers, they are also huge influencers of their overseas peers. Chinese buyers also view Australian sites and sources as more trustworthy and knowledgeable. 
Australian agents and developers should leverage this inherent credibility to reach international customers and ensure their brand is top of mind among the Chinese community to successfully capture the Chinese market.
Esther Yong is director of <a href="https://www.acproperty.com.au" target="_blank">ACproperty.com.au</a>.
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 Market locally first to reach China: ACproperty's Esther Yong

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One of China's biggest financial institutions is offering zero-deposit home loans for off-the-plan apartments in Melbourne and the Gold Coast.
The banking division of PingAn Insurance was offering the loans to Chinese investors in Shanghai, the Australian Financial Review reported..
"Become an Australian property owner with zero down payment," the marketing advised.
"Join hands with PingAn and realise your overseas property dream," it added. The banking division of Ping An unveiled the zero-deposit product to Chinese investors in Shanghai last week.
PingAn and property marketing group Austpac are offering Chinese investors the zero-down-payment option for apartments in Melbourne's West Brunswick and Hope Island on the Gold Coast.
<a href="https://www.rcorporation.com.au/apartment/the-york-west-brunswick/" target="_blank">The York, a large apartment development in West Brunswick</a> is one of the developments being promoted by PingAn's no-deposit loan offer.
PingAn is also offering the zero-down scheme for investors buying into the Ramada serviced apartments at Hope Island on the Gold Coast.
The lending practices come as the Australian Prudential Regulation Authority and the Reserve Bank of Australia seek to cool the Australian property market with tighten lending practices for local property investors.
Australian regulators are powerless to prevent the lending practices of offshore banks which has been <a href="finding/financing/loans-and-mortgages/43019-chinese-buyers-to-benefit-from-apra-crackdown-on-local-borrowers-john-symond" target="_blank">highlighted in the past by mortgage broking chief John Symond</a>.
Simon Moreira, a sales manager with R Corp, which is developing the The York told the AFR he was unaware buyers were being offered zero-deposit loans. 
It emerged Chinese investors being offered zero-deposit home loans over Australian apartments will be charged credit card interest rates, around an annual interest rate of 14 per cent.
China's benchmark, one-year lending rate sits at 4.35 per cent, after being lowered by 25 basis points last weekend.
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Zero deposit loans offered to Chinese property investors on Melbourne project

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A Chinese investor has fought off a number of local rivals to secure a Hawthorn office building for $9.85 million.
It was on a tight 4.78% yield through CBRE.
Some four parties put in 108 bids as the price raced past the former record to post a new building rate record for the area of $13,979 a square metre.
The previous record had been the $10,578 a square metre paid for 1 Oxley Road in May. 
Located directly across the road from Swinburne University, the recently refurbished 500 Burwood Road property comprises 714 square metres of office space over two levels on a 1998 square metre site, including 21 car spaces and rear access.
It was sold fully leased to long standing tenant, Australian design and construction company Qanstruct, on an eight year lease at gross annual rental of $500,000.
The former Congregational Church proved to be a big attraction for the successful buyer.
The vendor was Qanstruct MD Mark Ruff.
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j.ballantyne1990-6AQqhLzZaK

Chinese buyer pays $9.85 million for Hawthorn office

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Chatswood is the second highest buyer destination of Chinese property investors in Sydney, although Juwai.com’s director Carrie Law says Chinese investors have been turning away from Sydney real estate.
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The Golden Week of celebrations, a popular Chinese holiday when China-based buyers have traditionally visited Australia to purchase new housing en masse, proved quieter than normal.
“We still (saw) some transactions, but it’s not the free-for-all of past years,” Ms Law said.
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The Sydney CBD has been the most popular area for Chinese buyers.
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Chinese buyers made six per cent fewer inquiries than in the previous quarter and nine per cent fewer inquiries than over the same period last year, according to Juwai data.
The five most popular suburbs for China-based buyers over the past year were the Sydney CBD, Chatswood, Parramatta, Olympic Park and Edmondson Park.
The year before that, north shore suburb Castlecrag was the most popular, followed by the Sydney CBD, Marsden Park, Pyrmont and Ryde.
The Juwai data coincides with a new report that overall Chinese investment into Australia slumped 40 per cent last year, twice the drop worldwide, according the Australian National University, supported by Treasury and with input from the Reserve Bank of Australia.
The report shows Chinese commercial investment peaked in 2016 at $14.9 billion, before falling to $8.9 billion last year.
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"This is an unusual drop in Chinese investment into Australia," the project's leader Peter Drysdale, who heads the Asian Bureau of Economic Research at ANU told The Australian Financial Review.
He noted the decrease was significantly larger than the 19.3 per cent fall in China's worldwide foreign direct investment.
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The database shows $40.4 billion of Chinese money made its way into Australia over the past four years, via 262 transactions.
Last year, the mining sector still accounted for the biggest proportion, making up just over half of the total value of transactions. However, its share has fallen since 2014 as other sectors such as health care and financial technology are starting to attract interest from Chinese buyers.
"There has been a significant diversification of Chinese investment in Australia," said Professor Drysdale.
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Sydney apartment suburbs rank as most popular Chinese property investor destinations

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The Chinese purchasing of offshore property will increase in 2016, according to an industry survey.
According to Investorist, an online platform for off-the-plan sales, a poll of China-based real estate agencies found 149 of 150 of them expect to see a spending spree exceed that of 2015.
Australia was nominated by 60 percent of those agents as their most preferred market for property investment, The Australian Financial Review has reported.
Those agents will sell up to 11,000 offshore properties to their Chinese clients this year.
China is now Australia's largest foreign investor, with $46.6 billion in proposed investment in 2015, according to the Foreign Investment Review Board.
Real estate investment comprised the bulk of Chinese investment, with $24 billion spent in 2015, double that of the previous year.
The Investorist survey suggests that risk mitigation is the main reason Chinese investors are looking abroad.
The devaluation of the Chinese yuan against the US dollar has reduced the buying power of Chinese investors in the US and Britain, whilst the Chinese government has been attempting to put the brakes on offshore investment in a bid to shore ip its waking currency. 
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Chinese offshore purchase to increase in 2016

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The New South Wales Government's investment campaign NSW Now has released a handy property and investment shopping list for potential Chinese investors as part of a sales brochure of tourism investment opportunities and property in NSW.
Iconic Sydney sandstone buildings, harbour side greenfield sites and even the Jenolan Caves get a mention in the release, which describes the history of the property and links for tender information.
The shopping list highlights property such as:
1. The Lands Building, 23-33 Bridge St, Sydney
2. Jenolan Caves
3. Ausgrid Building, 570 George St, Sydney
4. Georges Heights Fuel Tanks, Headland Park, Mosman
5. Headland Park greenfield site, Mosman
6. North Head Sanctuary Officer's Mess
 
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jonathanchancellor-7SQnKwU6yx

Australian property shopping list heads to China

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GEUST OBSERVER
The scale of Chinese investment in the Australian residential property market continues to polarise public opinion. Chinese buyers are often blamed for driving up house prices in Australia and causing the current affordability crisis.
However, Chinese offshore purchases are surprisingly low. Based on Foreign Investment Review Board (FIRB) approval figures, ABS data, and our own data on actual Chinese investment in commercial real estate, we estimate Chinese residential real estate investment totals around 2% of all residential real estate transactions in Australia. We define “Chinese investors” in legal terms as those who require FIRB approval for their residential property purchases.
This figure is obtained by dividing estimated Chinese investment volume in residential real estate by the total volume of residential real estate transactions. For the financial year 2013-14, based on FIRB statistics, we estimate residential property investment by Chinese investors was A$5.8 billion. This is consistent with KPMG/University of Sydney (USYD) data on actual Chinese investment in Australia.
According to the Australian Bureau of Statistics, the total sales value of residential property in Australia for the same period was A$258 billion.
Residential vs commercial
We estimate residential property investment made by Chinese investors is A$5.8 billion for the financial year 2013-14. This figure is an estimate because FIRB data for each country only list the total value of approved real estate investment without differentiating between commercial and residential real estate.
The split between commercial and residential real estate is only available for the overall investment approved for all foreign countries. For 2013-14, the ratio between commercial and residential real estate was 53 to 47. Applying this ratio to the total approved volume of Chinese real estate investment of A$12.4 billion, we obtain an estimate of A$5.8 billion for residential investment and A$6.6 billion for commercial real estate investment.
It is important to keep in mind that FIRB approval figures are generally higher than actual investment figures. For commercial real estate investment the KPMG/USYD database shows that actual investment volume was A$4.4 billion in the 2014 calendar year, which is lower than the FIRB approval figures.
Total sales value of residential property
For the financial year 2013-14, the ABS recorded 482,720 property transfers. The average price of residential properties in Australia increased by 6.3% from A$516,300 in the September 2013 quarter to 548,900 in the June 2014 quarter. Using ABS quarterly Residential Property Price Indexes data, we obtain a total sales value of residential property in Australia of A$258 billion.
The scale of Chinese investment
Based on FIRB data, overall foreign investment accounts for 13.4% percent of total residential real estate investment, while Chinese residential investment in the Australian real estate market lies near the 2% mark.
These estimates are aligned with the NAB Quarterly Australian Residential Property Surveys. These show demand by all foreign buyers fluctuating between 12.5% and 10.2% for new properties and 8% and 7.2% for established properties for FY 2013-14.
With declining economic growth and an increasingly weakening Australian dollar, the issue of foreign investment in the Australian residential real estate market will not subside in the foreseeable future.
Before suggesting Chinese investors are a major factor behind declining affordability, commentators should at least consider the data.
Information on Chinese investment in Australian real estate relies on data sets which are compiled for different purposes and produce a variety of different and sometimes incompatible results. The House of Representatives Standing Committee on Economics in its 2014 Report on Foreign Investment in Residential Real Estate highlights the discrepancy between official FIRB and ABS data and concludes that detailed information on Chinese investment in Australia’s residential property markets is not available.
But based on the data we do have, Chinese investment in Australian residential real estate accounts for just 2% of the total real estate sales volume. Chinese applicants for residential real estate investment approval account for one sixth or 16% of potential foreign real estate investors. This suggests the housing and housing affordability crisis will not be solved by a clamp-down on one group of buyers.
Hans Hendrischke is professor of Chinese Business and Management at University of Sydney and can be contacted <a href="https://theconversation.com/profiles/hans-hendrischke-115034" target="_blank">here</a>.
Wei Li is lecturer, Business School at University of Sydney and can be contacted <a href="https://theconversation.com/profiles/wei-li-12212" target="_blank">here</a>.
Both are authors for The Conversation.
 
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mick.cee-iDmgDDAmu8

Chinese investment in residential real estate just 2%

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Ausin Group (Ausin) has opened two new offices in China to cash in on the growing demand from China buyers for new Australian properties.
The offices are based in Dalian and Chengdu, which takes its total number to 15 offices in China.
Ausin employs over 500 staff working across Sydney, Melbourne, Brisbane, Auckland and London.
“In the past 12 months, Ausin has witnessed an increasing appetite for new Australian properties from investors in tier two cities which are those considered to have high growth potential," said Joseph Zaja, the group's managing director.
“Ausin is expanding into growing cities which are the engine rooms for development in the future. China’s middle class is growing and much of that progress can be seen in tier two cities.”
Chengdu has the most number of universities and research institutes in southwestern China with 49 colleges and universities. In 2010, over 140,000 students graduated from these institutes.
According to a nationwide appraisal by the National Bureau of Statistics, Dalian ranks eighth among Chinese cities in terms of overall strength. The city’s main industries include machine manufacturing, petrochemicals and oil refining, and electronics.
“Australian property is looking very lucrative to Chinese buyers for several reasons. These include the growing middle class seeking safe havens outside China to invest their money, the clean livability of the cities and world-class universities which are in close proximity to CBD areas. The value of the Australian dollar against the yuan also makes the country a favourable investment destination.”
Ausin sells premium investment properties for Australian property players including Stockland, Mirvac, Lendlease, Intrapac, Cedar Woods and Setia.
This month a new joint-venture was unveiled by Villa World to deliver a residential community in the fast-growing suburb of Rochedale, on Brisbane's southside in partnership with Ausin.
Villa World had previously purchased a number of land parcels in Rochedale to form a 8.7 hectare site which it planned to develop as a land-only offering.
As part of a joint venture arrangement with Ausin Rochedale Pty Ltd ATF Ausin Rochedale Trust, Villa World will build the 148 premium residences planned for the site, to be offered under traditional progress-payment contracts.
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Chinese Buyers

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