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15-11-2014, 03:29 PM
Chinese cash injection not going anywhere soon
Samantha Hutchinson
321 words
15 Nov 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
The propensity of Chinese investors to fund Australian developments through equity rather than debt has experts expecting the investments will be longer-lived and more stable than the Japanese foray of the 1980s.
Chinese investors are expected to pour more than $40 billion into the market in the next decade, with a substantial proportion flowing into property. And while long-term property investors may have fears the influx will end as quickly as it began, experts are confident the trend is far more sustainable than the Japanese experience.
"This time it's different because the Japanese were funded primarily by debt, whereas the Chinese have equity in all of their developments," Savills research head Tony Crabb said.
"The Chinese economy is already one of the biggest economies in the world, but on a per capita basis, its outflows are still relatively small . . . on that basis, it can still grow another five or six times. We haven't seen anything like it."
Savills analysts expect Chinese offshore direct investments will reach more than $US2 trillion ($2.3 trillion) before the end of the decade, with Australia in line to receive about 2 per cent of that. And while investment outflows might flatten, the analysts are certain they will continue to move upward.
"The only thing that could possibly change the current trend would be for investment rules to change in China, and we just don't see that happening," Mr Crabb said.
Chinese sovereign wealth funds and state-owned developers, such as Greenland or Chinese Investment Corporation, are well established in Australia, but the mix of property investors is expected to broaden, Mr Crabb said. Chinese conglomerates, insurance companies and a greater number of wealthy individuals will make up the next wave of Chinese investment in Australia as they seek exposure to a property market that is not correlated with Chinese cycles.
Fairfax Media Management Pty Limited
Document AFNR000020141114eabf0001w
Samantha Hutchinson
321 words
15 Nov 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
The propensity of Chinese investors to fund Australian developments through equity rather than debt has experts expecting the investments will be longer-lived and more stable than the Japanese foray of the 1980s.
Chinese investors are expected to pour more than $40 billion into the market in the next decade, with a substantial proportion flowing into property. And while long-term property investors may have fears the influx will end as quickly as it began, experts are confident the trend is far more sustainable than the Japanese experience.
"This time it's different because the Japanese were funded primarily by debt, whereas the Chinese have equity in all of their developments," Savills research head Tony Crabb said.
"The Chinese economy is already one of the biggest economies in the world, but on a per capita basis, its outflows are still relatively small . . . on that basis, it can still grow another five or six times. We haven't seen anything like it."
Savills analysts expect Chinese offshore direct investments will reach more than $US2 trillion ($2.3 trillion) before the end of the decade, with Australia in line to receive about 2 per cent of that. And while investment outflows might flatten, the analysts are certain they will continue to move upward.
"The only thing that could possibly change the current trend would be for investment rules to change in China, and we just don't see that happening," Mr Crabb said.
Chinese sovereign wealth funds and state-owned developers, such as Greenland or Chinese Investment Corporation, are well established in Australia, but the mix of property investors is expected to broaden, Mr Crabb said. Chinese conglomerates, insurance companies and a greater number of wealthy individuals will make up the next wave of Chinese investment in Australia as they seek exposure to a property market that is not correlated with Chinese cycles.
Fairfax Media Management Pty Limited
Document AFNR000020141114eabf0001w