Australia’s property market ignores China snub as Singapore, US funds rush for prized commercial assets

·4-min read

Investors are snapping up commercial properties in Australia with the rare support of Hong Kong buyers despite lingering Canberra-Beijing tensions, pushing the market Down Under towards its busiest in six years.

Commercial property investment involving deals above A$10 million has reached A$35.4 billion (US$26 billion) to date, a 70 per cent increase from a year earlier, according to Colliers International. The volume is within 17 per cent of the A$41.3billion recorded in 2015.

The surge in transactions follows Canberra’s move to ease pandemic curbs as governments around the world decided to “live with Covd-19” to revive economic growth. The decision appears to be aiding the real estate market, which has suffered from the withdrawal of mainland Chinese buyers as diplomatic relations deteriorated.

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“Border closures have not dampened demand,” said John Marasco, managing director of capital markets and investment services at Colliers in Sydney. “These investors had already decided to place capital in Australia and the local property industry was quick to adapt to allow this investment to continue, particularly this year.”

An aerial view of Canberra, the seat of government, looking south toward Lake Burley Griffin and Commonwealth Bridge on a sunny afternoon. Photo: SCMP Handout
An aerial view of Canberra, the seat of government, looking south toward Lake Burley Griffin and Commonwealth Bridge on a sunny afternoon. Photo: SCMP Handout

The uptick suggests investors at home and abroad have gotten over the lethargy caused by the diplomatic tensions of the past two years. Various high-profile deals announced recently included surprise buyers from Hong Kong, while Singapore-based investors provided the biggest source of capital inflows.

Link Reit, Asia’s largest real investment trust, last week agreed to pay A$538.2 million for the Queen Victoria Building, the Strand Arcade and The Galeries in Sydney. Hong Kong-based JY Group joined with Haben Property Fund last month to buy Wollongong Central in New South Wales for A$402 million.

Nasdaq-listed UCommune, a Beijing-based co-working space operator, partnered with Australian property developer Hexa Group last week to open its first location in the country in Melbourne.

“Ucommune has been actively exploring international markets since 2016, and given the huge potential for the co-working industry across the world, it seemed appropriate to enter the Australian market,” a spokesman for Hexa said. The partners intend to add three or four more local locations over the next three years, he added

Australia’s decision to ease Covid-19 curbs, such as by allowing citizens to travel abroad and letting skilled workers and international students into the country, are among the reasons for its optimism, Hexa Group added.

Meanwhile, Cbus Property and superannuation fund UniSuper agreed to buy stakes in two shopping malls from AMP Retail Trust in Australia’s biggest retail transaction. They paid A$2.2 billion for an 80 per cent stake in Pacific Fair in Queensland and a 50 per cent share in Macquarie Centre in New South Wales.

These transactions underpinned the market revival, with Australia posting the second-biggest growth in terms of deal volume, of 106 per cent, according to data compiled by Real Capital Analytics, behind the 115 per cent growth in Singapore.

Capital flows also benefited the Australian commercial property market. Singapore-to-Australia was the most active trade route so far this year, with deals amounting to US$4.3 billion, according to RCA. The market received US$1.9 billion from US investors and US$1.4 billion from Canada-based buyers.

They picked up the slack from mainland Chinese investors, whose outlay shrank by more than a third to US$615 million in 2020, according to RCA, which tracks deals worth at least US$10 million. Their purchases in Australian real estate amounted to US$222 million this year through August.

Mainland Chinese investors ploughed US$2.5 billion into the Australian property market in 2018, before relations took a turn for the worse. Australia banned Huawei Technologies from building its 5G telecommunications network while trade suffered over the origins of coronavirus.

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