The Effect Of Asian Money On Australian Property Development

Home development in Australia is changing!

If you had not noticed that we have an electronic flood of Asian money entering Australia then you need to start out talking to people in the industry before you get yourself into a spot of bother. Property Development London

Asian money is changing the face area of property development in this country through its sheer volume level and through the Asian kitchenware developer’s very different attitude to the way that property development has recently been undertaken in Australia up until now. 

The apartment market appears to be the Asian property developer’s preferred target. It is my understanding that small Asian investors are seeking returns greater than about 2%, which is what their home market provides, and is what the Australian market exceeds (by say double). This makes the sale of house “easy” in Asian countries.

Also I understand that owning two investment properties in China can have substantial taxation implications. I am just not an expert on China taxation; I’m just repeating something I was told by an Oriental developer.

This means that there is no “issue” with undertaking large level developments without staging as they are certain with their sales. This can also bring about an abundance of apartments in the local market if sales are required in Sydney.

One Asian developer I actually know told me they presell the apartments and get the full sales value at that time to fund their development. There goes the Foreign property development finance sector! Bank finance providers will likely need to think very carefully how they will alter their business practices to avoid being demoted to providing small scale development finance that the Asian property programmer isn’t interested in.

In lots of discussions with my network I hear people admit Australia is a “safe haven” for Asian money. If this were the truth then it would describe why Asian property designers may pay an above selling price for a potential development site or pay for a site in advance rather than acquiring a site with an Choice Agreement.

Again it has a massive impact on Australia’s traditional development process of “controlling” a website before having to pay for it. Which means that an Foreign developer must compete in a market the place that the site costs more, are purchased outright rather than controlled, and in which the competitor doesn’t need to jump through a financier’s hoops.

Let’s sum up these main issues:

a) Residential apartment investments in Australia have returns about double of that which small Asian investors can acquire at home;

b) Taxation issues in some Asian countries might create Australian investments more good;

c) Large scale advancements can be undertaken without staging potentially “flooding” the apartment market;

d) Pre-sales of apartments in South america can cause the full value of the property sold being released to the developer to take on the project removing the requirement to deal with a financier;

e) Potential development site prices are being forced up;

f) Australian property developers are competing against developers who don’t have the same constraints as they do.

Interesting times are in advance for the Australian property development industry.

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