Overseas investments into Victoria’s commercial property market hit 10-year low
Mr Ho said high financing costs and interest rates were challenges Chinese investors faced in Australia.
Despite big ticket purchases into Victoria, Australia has fallen from China’s top two destinations for commercial property investment for the first time since 2017.
Research from property technology company Juwai IQI for the second quarter of 2023 showed Chinese investment had largely shifted towards Southeast Asian countries.
Indonesia, Malaysia and Thailand were first, third and fifth destinations for Chinese investing in 2023 year-to-date, respectively, knocking Australia from second to fourth position and the United States off the list entirely.
RELATED:Sailor turns yacht into a bar inside home
Historic Queenscliff pub listed for sale with $6m+ price hopes
Vic vacation destination pain looms in tax grab
However, China remained Australia’s second largest investor, with Victoria, Queensland and New South Wales as the country’s top destinations for commercial property investment.
JLL head of capital markets, Victoria Josh Rutman said money coming in for commercial real estate from overseas was at a 10-year low.
“That’s mainly to do with a lack of certainty around where the market’s heading, particularly in light of rising interest rates,” Mr Rutman said.
“There’s a bit of a wait and see mentality that’s coming from overseas purchases where they clearly have confidence in the Australian economy.”
Mr Rutman said money coming in from overseas was at a ten year low.
He added that there was still strong underlying confidence in the strength of the commercial property market in Victoria, but every asset class was going through its share of change.
“For that reason, we think a lot of overseas groups will look to take advantage of what has been a slightly more subdued period where there’s been less transactions,” Mr Rutman said.
“There has been increased pressure, particularly on some of the institutional or real estate investment trust owners, to liquidate some of their holdings.”
Victoria managed to secure a notable investment in the second quarter of 2023, with a $30m acquisition of a mid-sized Melbourne office building at 99 Queen St in April by a mainland China investor.
Mr Rutman said once pricing settled post-Covid and post-interest rate shifts that have occurred in recent months, there would be a “really large deployment” of money from a number of countries in Southeast Asia, not just China.
“We think Singapore, Malaysia, Indonesia, Taiwan; there’ll be a number of capital flows from those countries and we believe it’s probably about six months away,” Mr Rutman said.
Mr Ho said high financing costs and interest rates were challenges Chinese investors faced in Australia.
Juwai IQI co-founder and group managing director Daniel Ho said Australia’s fall from second to fourth most-popular investment destination for small and medium Chinese commercial property investors was mostly cyclical.
“In Australia, they face high financing costs and, when it comes to office property, a difficult outlook due to higher interest rates and lower occupancy needs,” Mr Ho said.
“Commercial property vendors will just have to work that little bit harder to attract a buyer.
“Assets like neighbourhood shopping centres, logistics hubs, and tourism facilities are still appealing to Chinese buyers.”
Sign up to the Herald Sun Weekly Real Estate Update. Click here to get the latest Victorian property market news delivered direct to your inbox.
MORE:Carrey cuts Magical Sanctuary price by millions
Troll-like home under bridge lists for $365k
Suburbs in Victoria where homes are now overvalued
sarah.petty@news.com.au
