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Chinese bail out of apartment projects!

Scores of east coast property development sites, some able to take 400-unit apartment towers, will hit the market within months as Chinese developers crippled by a lack of finance are forced to sell.

The move comes as Chinese investors are pulling back from some of the world’s key commercial real estate markets, as Beijing continues tight restrictions on capital outflows.

Matrix founder Andrew Antonas, one of the largest sellers of residential development sites in NSW, has at least 12 large-scale residential development sites already on the market.

“Our phones started to run hot from about August onwards with predominantly Chinese owners wanting to sell their residential sites which they had planned to develop,” Antonas says.

“We are already talking to Chinese owners with sites that can take more than 300-400 apartments — we are already in discussions with half a dozen of these overseas owners that need to sell.”

Antonas says there are two factors leading to the sell-off — the market for units has started to decline, and financing.

“The banks have turned the tap off on financing and over­reacted,” he says.

But he says sites within a 15km to 20km radius of Sydney’s CBD, which can take up to 200 apartments, are safe from sale. “The Chinese are holding on (there).”

But larger-scale sites within the same 15km-20km radius, which allow the development of more than 300-400 apartments, are being sold off by their Chinese owners, many of whom had paid too much.

“It’s (also) the sites that are greater than 20km from the city, it’s mainly the outer ring — they will also be sold off,” Antonas said. “We have more than 12 large residential sites on the market at the moment.”

Many of the sites are in Sydney’s northwestern suburbs such as Rouse Hill and Kellyville.

“There are some inner-suburban sites which are also slated for sale in 2019, we are expecting them to come on the market,” Antonas says. “We are already talking to Chinese owners — all are sites for more than 300-400 apartments. We are in discussions with half a dozen of these overseas owners.”

Shimao, controlled by Chinese-Australian billionaire Hui Wing Mao, is joining the ranks of Chinese property players selling Sydney towers by offering a half stake in its $800 million-plus tower next to Hyde Park.

Many Chinese developers — most notably Dalian Wanda and HNA — have already sold out.

Shimao insists it remains committed to the local market, although Hui has switched to pursuing agricultural assets and could sell a stake in the 31-level tower at a profit after paying $392 million for it four years ago.

Amid signs of a slowing Chinese economy, Beijing’s focus has been on keeping the currency stable, which means there will be little appetite to ease rules on overseas investments.

One Circular Quay Wanda Sydney

An artist’s impression of Wanda’s One Circular Quay development in Sydney.

While some mainland Chinese groups have come under pressure to repatriate funds from luxury projects, Shimao has steered clear of glitzy spending and instead backed low-profile suburban commercial and unit projects or chased agricultural deals.

Six months ago, the Chinese government also reportedly asked developer HPG, a subsidiary of conglomerate Hailiang, to sell its overseas investments given mainland pressure to claw back capital.

HPG had been looking for a partner or buyer for its $600 million, 400-unit One Sydney Park development.

CBRE agent Mark Wizel expects Chinese developers to shift away from apartment development to shopping centre investments. He cites the recent sales of Burwood One for $181.5 million and Epping Aurora for $44.5 million to Chinese investors last year.

“This was partly driven by the shift away from the apartment boom focus on development sites,” Mr Wizel said.

“We expect to see increasing interest from Chinese buyers, and Asian buyers in general. This will be driven by wider recognition of the long-term underlying land value that many retail shopping centre assets offer on top of the very secure, Woolworths/Coles-based income streams.”

One Chinese developer is defying the trend — the Yuhu Group is developing One Circular Quay, which it bought from Wanda last year. It is also developing a three-tower apartment development on the Gold Coast called Jewel.

Jewel Gold Coast

The Jewel construction site on the Gold Coast.

“We have high expectations for this project and there is responsibility to get it right,” a Yuhu spokesman says.

“We envisage the residential tower will be a home for many permanent residents, and providing for the highest quality of living is central to our brief. One Circular Quay will be an important part of Sydney’s waterfront transformation and we want it to be a real landmark. The exterior design elements will guarantee this while respecting the characteristics of the area.”

For his part, Antonas expects to find buyers for the development sites he has on the market: “There are local buyers with cash when the price is right, they will leap on those things.”

The rise in office rentals and the potential to convert into luxury apartments could make the sale highly lucrative.

The office block at 175 Liverpool St has long been touted for its dress-circle position near Hyde Park and a northerly aspect that could suit residential developers. But many of the recent blocks that have sold in the area have gone to office groups like Charter Hall.

– with Ben Wilmot

This article originally appeared on www.theaustralian.com.au/property.

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