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Chinese developers are steering away from expensive inner city site purchases for apartment projects as they wait out the housing downturn and the uncertainty of next year’s federal election.

At the height of the boom in and around 2013 to 2015, many Chinese developers including Greenland, Golden Horse, Country Garden, Aqualand and Dalian Wanda paid top prices for apartment sites, but now that tide has turned.

The housing market, particularly for apartments was “dire”, developers said.

Around the country, new development launches have halved, falling to 128 at the end of March, compared with 248 in 2016, Urbis data shows. Kilometre-long queues at Saturday morning apartment sales are a thing of the past.

No more queues...
No more queues… SUPPLIED/Greaton

The slump in new project launches has been a result of tight housing lending, dwindling local and foreign investors due to taxes and surcharges and a drought in construction and development finance for developers.

“The housing situation is not great right now, so we won’t be actively involved in signing on many new deals. Our focus is to get our current projects completed and done well,” Country Garden Australian chief executive GT Hu told The Australian Financial Review.

“We will of course still look out for good opportunities because we have a long term view but we will not rush. Now that there aren’t so many active players, we can afford to take our time. Now is a time for re-assessment and analysis.”

Country Garden, one of the earliest Chinese players at the start of the apartment boom in 2013 acquired the prime site at Delhi Road in North Ryde in Sydney’s north shore for its 800-unit “Ryde Garden”. It launched and sold well in 2014.

It caused a stir after contemplating the acquisition of the country’s biggest apartment builder Meriton for $10 billion in late 2014 and has since paid another $400 million for a 363-hectare site in Wyndham Vale in Melbourne.

Golden Horse which also stormed into the Sydney development market surprising bidders with its $380 million offer for Goodman Group’s Ashmore Estate in Sydney’s Erskineville in 2014 has since stayed away from high-priced purchases.

‘The market is slow’

Golden Horse’s Jason Zhang said the group was exploring house and land deals in Brisbane, after launching and selling 70 per cent of the first stage of its Ashmore apartments “Park Sydney”, now a joint venture project with another high profile Chinese developer Greenland Group. The pair is planning a second-stage launch early next year but it will be market-dependent.

“The market is slow and the developments, conservative,” Mr Zhang said.

“Developers are now looking at profits rather than being scale-driven.”

“We think the market will continue to slow down for a while maybe for the next 12 to 18 months, but whether it keeps going beyond that, we don’t know.”

“We are not likely to kick off another apartment project at this stage of the market at least until construction costs go down. “

Macrolink, which is slowly developing its luxury apartment project at the former Coca-Cola Amatil site in Sydney’s Circular Quay too believes prices will keep going down and has also expressed keen interest in house and land deals, its Australian representative Michael Gao says.

Waiting on the election

Adelaide-based developer, Greaton, once backed by Chinese capital and the big name in Darling Harbour developing the $730 million high-profile Darling Harbour hotel project, “The Ribbon” with Grocon, will wait and see.

Its chief executive Nicho Teng is keen on seeing how things go post next year’s federal election. Aside from demand-side policies, he was hoping the supply of housing could be expedited through faster approvals of projects.

“The prospects in the housing development market is government dependant and we will know better after the election. Policies are the most influential aspect of the housing market,” he said.

Greaton’s current strategy, not unlike other local players such as Mirvac, is to keep accumulating passive long-term assets such as office buildings. It had already unravelled that strategy, cooling its developments and buying up towers like 187 Thomas Street in Sydney’s Chinatown.

It is also on a hunt for a new partner for or a divestment of its site in St Leonard.

Others like Chinese conglomerate Dalian Wanda had to exit the Australian real estate market altogether as China puts a stop on overseas investments.

Source: Financial Review Su-Lin Tan 07Nov18

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