Year of the horse at full gallop
The growing phenomenon of Chinese investment into Australia holds much promise for the rejuvenation of Australia’s property sector. The stats tell the story: the real estate sector was the top destination for foreign investment in Australia during the 2012-2013 financial year, with approvals of AUD$51.9 billion, surpassing other major sectors including that of mineral exploration and development.
Mainland Chinese investors form a sizable slice of this growing pie. AECOM’s latest Market Pulse publication, which provides analysis of building activity and construction tender price trends, showed that Chinese investors, long active in the residential property space, are increasingly focusing on the commercial property market. AUD$871 million of Chinese direct investment in commercial property in 2013 compared to just AUD$17 million in 2007 paints a pretty clear picture.
It’s easy – tempting even – to assume the steady stream of announcements pertaining to Chinese investment in Australia will continue. As speculation continues as to whether China’s own internal property boom is on the wane, why shouldn’t it instead focus on acquisitions in Australia’s cities?
It’s easy to assume, yes, but dangerous too. A stable political climate and security of title are certainly advantages, but they alone aren’t enough to ensure Chinese investment continues at such rates. Businesses in Australia need to evolve to reflect changing needs on the part of potential Chinese investors.
In many ways, it’s a two-way street. There’s great opportunity for all parties to benefit from new ways of doing business, of forming partnerships based on mutual trust and understanding, where high-level guidance on the opportunities and big-picture plans in different regions are presented clearly, regularly, and honestly.
I recently attended a function at AECOM’s Brisbane office, hosted by The Property Leaders Association. The event looked at the impact of foreign investment in Brisbane, a city that’s been labelled “Australia’s New World City,” and a city that will welcome everyone from U.S. President Barrack Obama to German Chancellor Angela Merkel during November’s G20 summit.
Industry leaders joined Chinese Consul-General Dr. Zhao Yongchen and Brisbane Lord Mayor Cr. Graham Quirk for a wide-ranging discussion that, among other things, explored what Brisbane has to do to continue developing as an attractive investment destination for Chinese property developers in particular.
The idea of the city further strengthening its strong cultural identity was raised several times. Brisbane is and will remain an attractive investment destination because of its burgeoning reputation as a regional powerhouse in technology and innovation, mining and resources, tourism and higher education.
In short, cities become attractive for investors when they play to their strengths or, to put it another way, when they don’t try to be things they’re not. The same can be said for businesses wanting to partner with potential Chinese investors; those that play to their strengths, without pretense, stand to form meaningful, productive and, ultimately, mutually-rewarding relationships.
We could see that last month, when we held a breakfast briefing for developers in our Sydney office at which a colleague presented AECOM’s views on the potential development opportunities in and around Sydney resulting from Sydney’s Draft Strategic Plan. This was attended by a number of Chinese investors.
The type of open, two-way communication seen at these two recent events is something we‘ll see more of. This sort of partnering demonstrates both how Australia’s property sector has evolved, and an acceptance that, in the Asian century, how Australia engages its neighbors in the Asia-Pacific in a business sense will make all the difference.
Alan Baker is AECOM’s managing director, Program Cost Consultancy, Australia + New Zealand.