Asian investors driving Sydney apartment supply
Asian investors are snapping up off-the-plan apartments in Sydney, which is starting to have a positive impact on development activity, according to the latest report from Knight Frank.
New apartments priced between $650,000 and $850,000 have seen particular interest from Asian investors.
The Sydney Residential Apartment Snapshot - November 2012 report, sourcing apartment supply data from Cordell Connect, indicates that the apartment supply is set to increase from 8,754 in 2011 to 10,520 apartments in 2012, with a large proportion injected into Sydney's Local Government Area (LGA), particularly in Zetland.
Philippe Brach, Multifocus Properties and Finance’s CEO, told Smart Property Investment that the increase in apartment supply will be absorbed as buyers look to purchase new apartments in affordable areas of Sydney that is still close to the CBD.
“People want to buy apartments in some areas of Sydney can’t afford to any more so they’re looking elsewhere, and an area like Zetland is a prime example where people can go,” Mr Brach said, who also points to Meriton developments in Arncliffe and Wolli Creek that have been snapped up on the back of affordability.
Mr Brach believes that any new apartments built in Chatswood, an area dominated by Chinese - in particular wealthy Chinese - will also be absorbed very quickly, driving demand in the area.
According to Mr Brach, a recent Mirvac off-the-plan project in Chatswood was almost sold out over a weekend, mostly to Chinese investors. Although the sales were guided by local Chinese buyers, the money was coming from offshore.
Meriton’s national sales director, James Sialepis, said two of Meriton’s developments, Eon and VSQ, in Sydney’s Zetland have been popular with overseas investors due to strong rental returns and proximity to amenities.
“The returns are very strong in those areas, they’re only four kilometres from the Sydney CBD, and they’re close to universities and schools, which a lot of Chinese investors look at closely when deciding on where to buy,” Mr Sialepis explained.
Similarly, Janelle Zhang, director of CBRE Residential Projects, explained that she has witnessed a high demand by overseas investors for off-the-plan apartments in Sydney.
“There’s always a very healthy percentage of people buying in the Australian market because the price in Australia is still very fair, compared with a lot of Asia’s big cities,” Ms Zhang said.
“They’re easy to rent out and the rental return is very good.”
Many parents are purchasing properties for their children while they are in Australia to study, which is where "the market is very strong”, she added.
While temporary residents, such as international students, can purchase one established dwelling to use as their residence in Australia, subject to FIRB approval, they must sell the property as soon as they leave the country.
Despite the restriction imposed on buying established dwellings, overseas investors can purchase multiple new or off-the-plan housing, which the government hopes will stimulate the apartment supply.
Looking at the report, this seems to be working. Apartment building approvals in NSW has experienced a growth of 17.6 per cent since the start of 2012.
Despite the numbers, Mr Brach said there would still be a shortage in Sydney’s apartment market.
Currently, local Asian buyers, particularly the Chinese, are accounting for 50 per cent of demand. According to the report, they favour apartments with efficient access to shopping and rail facilities in suburbs such as Ryde, Chatswood, Rhodes and Hurstville.
In Melbourne, international investors have shown interest in a different part of the market.
Michael Armstrong, an associate of Kay & Burton, told Smart Property Investment that as much as 40 per cent of properties in the over-$3 million market have been taken out by offshore buyers in the past 12 months.
The investment comes as mainland Chinese see Melbourne and Sydney as “safe havens for investment”, Mr Armstrong explained.
“They’ve shown an interest in almost every deal at that part of the market, being the eventual purchaser or not, and that has driven the market as well.”