The new Chinese investors about to make Australian foray

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Written by Michael Cranston, AFR July 2017

 

At least 10 Chinese investors and developers who are yet to make their mark on Australia’s property scene are preparing to make an entry despite a recent slowdown in corporate activity driven by China’s upcoming National Congress and tougher foreign investment restrictions imposed by Chinese regulators.

New federal and state taxes on foreign buyers and tighter lending restrictions have also created negative sentiment for potential Chinese developers and investors. However, JLL’s head of China desk, Michael Zhang, said many Chinese real estate companies were still very serious about investing here.

“Australia continues to be a major investment destination for Chinese capital and many Chinese real estate companies are serious about having some footprint in Australia,” Mr Zhang said.

In a report called The Future of Chinese Residential Developers in Australia, JLL conducted analysis into the 10 largest residential developers yet to enter the Australian market.

 

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Among the top 10 are Hong Kong-based Sun Hung Kai with a market capitalisation of $56 billion and Henderson Land, which recently paid a record $4 billion for a car park in Hong Kong. Other names include Evergrande and transportation business China Merchants Group.

“Some of the Chinese residential developers on this list are already showing interest in the Australian market or are involved in Australian industries outside of the residential real estate sector,” JLL senior analyst for residential research in Sydney and author of the report, Vince De Zoysa, said.

“We have already seen some of these firms enter Australia through other industries, in particular infrastructure. This allows them to establish a local presence in Australia in their core industry before moving up the risk and reward curve into residential development.”

A key driver for these developers will be the health of the foreign retail buyer market for new apartments in Australia. The federal budget changed the rules so that developers selling new multi-storey dwellings are now capped at vending 50 per cent of the total development to overseas buyers. Foreign owners will also start to incur a capital gains tax of 12.5 per cent when selling their main residential asset.

Interest from China remains high

“Despite increased taxes, tighter lending measures on development finance and limited availability of senior debt to overseas developers, the level of interest remains high for Chinese developers,” Mr Zhang said.

While Juwai.com has recently forecast Chinese buyers to spend $104.5 billion on global property this year, a significant fall from last year’s record high of $133.7 billion, Mr Zhang said that was not representative of a new wave of Chinese developers and investors.

“Australia continues to be a major investment destination for Chinese capital,” he said. “Australia’s average deal size is smaller than that of the US and the UK, which makes investing here accessible to investors of all sizes.

“Increasingly Chinese developers are seeking ready-to-go opportunities with existing DA or planning outcomes, thereby minimising planning risk and bringing clarity on project life cycle.”

Chinese corporate activity has slowed recently as a result of the upcoming 19th National Congress to be held in October. The tougher foreign investment restrictions imposed by Chinese regulators on $US1 billion-plus deals are still in place.

3 Industries Being Disrupted by Crowdfunding

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March 2017 Written By: Andrew Medal – Entreprener.com

Crowdfunding is rearranging the way that entrepreneurs finance their creative endeavors, whether they’re artists or engineers. From bringing startups a needed capital boost to getting students money to go to college, crowdfunding seems to be creating opportunity in almost everything.

More and more investors are noticing the clear-cut advantages offered by crowdfunding platforms, and it’s no surprise that they are rushing to claim their piece of the pie. In 2015, it was estimated that more than $34 billion was put into crowdfunding efforts.

At its current growth rate, the crowdfunding industry is multiplying in size every year. It’s trickling into several types of funding models (donation, equity and lending) and an array of industries (education, medical care and corporate finance). Whether willing or not, the majority of industry markets will be facing a major disruption in how capital is moved throughout the economy.

Here are the top three industries the crowdfunding sphere is set to disrupt and why:

1. Corporate finance: From software to farm equipment

Each year, U.S. companies invest in leased tools that range from software to construction equipment. As crowdfunding persists in its growth, the companies who lease utilities as a part of their businesses will have to engage with the crowdfunding sphere. The companies that embrace crowdfunding early will rake in the benefits of accessing small businesses that flock to it as a tool.

Large finance organizations can use it as a catalyst for gaining small businesses who seek to harness leased products that are tailored to them specifically. What’s more, the lower cost credit of the products they offer will appeal more to businesses that pay sky-high APRs.

For leaseholders of larger equipment, crowdfunding platforms will allow leaseholders such as farmers to finance crops and equipment from other farmers and associates. It’s in this way that their crowdfunding platforms will provide communities with better access financing.

2. Real estate: From housing to business establishments

For the real estate market, crowdfunding presents a huge solution. Before crowdfunding, closing an actual real-estate deal required back and forth passing and signing of documents among lawyers. Beyond being slow, the process often added up to thousands of dollars in legal fees. Crowdfunding allows businesses of all sizes to bypass the monotonous process and dodge expenses. What’s more, real-estate crowdfunding allows potential investors access to a wider array of deals.

Mark Suleman, the founder of real estate crowdfunding platform Macrocrowd, sees the benefits of this type of access firsthand. “I always hear from clients about how they struggled to access the right people and resources while looking for real estate investments abroad,” he explains. “But by getting on board with crowdfunding, though I can’t speak for other platforms, they’re able to access quality investments into institutional real estate — globally.”

It’s not just accessibility that’s grabbing the attention of venture capital dollars. Today’s internet-reliant consumer is well beyond acquainted with making investments online. Users are becoming more and more comfortable with putting their money into crowdfunded sites. For real estate businesses who get their hands into crowdfunding, this means access to a whole new crowd of their own.

3. Consumer lending: Cars and home appliances

While banks have backed away from lending consumer and small business with credit, peer-to-peer crowdfunding platforms are leaning in. As big banks begin to take themselves out of the equation, institutional and professional investors will begin to swoop in and sign up for them too.

For financial institutions, this means learning to leverage a crowd’s interest to inform their lending offers. As the trend continues, new crowdfunding platforms will pop up to cater to specific lending verticals. Imagine a crowdfunding space where consumers can get loans for anything related to transportation or kitchen appliances. In this way, brands will be able to save on financing costs while gaining on capital returns.

The Rise of Chinese Developers in Australia

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February 2017

 

Knight Frank have just released a report into emerging trends of Chinese developers in Australia, the report shows statistically an insatiable appetite for site acquisition throughout the country. This long term trend is set to continue and it’s impacting local developers as they become the under-bidders and miss out on new sites.

 

The following are key takeaways from the report:

  • Chinese developers are buying larger sites, average dwellings per site in 2016 = 502 (versus 2012 = 103);
  • Chinese site acquisition represent a massive 38%  of all direct residential sites in Australia (versus 2% in 2012)
  • Chinese developers are interested in larger sites and are diversifying from apartment sites into house and land product.

These statistics underpin the strength of demand for Australian residential assets. This interest driven by China is a net positive for our region as it ultimately results in increased economic activity which in turn creates jobs. 

For access to the Knight Frank report click here

 

WTF is Happening? How Airbnb and Uber are Reinventing Economics

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Airbnb owns no real estate…..Uber owns no vehicles.

Ten years ago I bet you had never heard of Airbnb or Uber, in fact even a few years ago these companies weren’t household names. Today they are getting bigger and bigger in the economic world of the “sharing economy”.

 

Airbnb and Uber are US tech start-ups that chose their industry  – Airbnb (hospitality) and Uber  (transport) these startup disruptors are today worth $30B  and $68B respectively. 

These industries have been shaken up to the detriment of the existing incumbents and they are not going away. They’ve upset a lot of people along the way, leaving other competitors fighting to remain profitable and regulators playing catch up.

So why are they thriving?

People now see a clear benefit in using financial technology services over outdated old world businesses, the last 5 years has seen the economic landscape reshaped to the point of no return. 

WTF is happening?

What’s happening is a massive economic shift on a global scale, it’s a reinvention of how we transact and how much we pay for a service.

The invention of an internet based scalable service on an inefficient industry has been made possible by financial technology or fintech. It’s the start of what I call the smarter economy.

This global change is transforming not just transport and hospitality but also property and finance, the banks are in the fintech cross hairs scrambling to remain profitable and relevant.

Our Banking System – Get Set for Disruption

In the smarter economy, banks become less relevant as consumers (both businesses and individuals) realise the Uber effect -smarter and cheaper ways to borrow, invest, research and transact.

Imagine a massive 150-year-old organisation with hundreds of shopfront locations, thousands of staff, old and clunky internal processes and life long employees on huge salaries. Sound expensive? It is expensive….this is your typical incumbent bricks and mortar bank still making huge year on year profits.

Users of banks are becoming smarter and empowered through technology. Do we need to visit a bank to transact? No. Do people want a better deal from their bank? Yes. Do people have loyalty to their bank? No.

So where will we be in 10 or 20 years in the smarter sharing economy? I’m not 100% sure but I can guarantee many of the traditional business models will no longer be around and although many new businesses will fail you can bet the likes of AirBnB and Uber will be thriving.

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Crowd Property Capital is a non-bank lender that effectively cuts out the middle-men in business loan transactions. Put simply an investor (business or individual) who has funds to loan can provide a borrower with these funds on agreed terms. The lender receives a rate between 8-12% pa and the borrower gets access to funds faster.  Investments are available on a wholesale basis to local and international sophisticated investors with a minimum investment of $500,000 AUD. For more information visit www.crowdpropertycapital.com.au

 

 

 

 

 

 

 

 

 

 

Shark Tank Rejected Property Investment Platform Reloads

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January 2017

 

In what was one of Shark Tank Australia’s biggest shutdowns of the second season, founder of Crowd Property Capital (CPC) David Lovato reflects on what was a cringe-worthy flat out rejection on national TV.

“From the moment I entered the shark tank I realised they hated the idea of backing a property industry start-up. I was a made to look like a property industry villain and walked straight into a bear trap.

I didn’t get any feedback from the show until the actual airing. As soon as I watched it I knew it was bad. Instead of my mates giving it to me there were crickets; not a word of banter but rather uncharacteristic blokey support which was concerning”

Fast-forward 6 months and the impact of getting on the show (and failing) has inadvertently become a major factor towards the early success of CPC. The online property development funding platform has taken on board the collective criticism from the sharks and changed the focus of the business model.

Originally the CPC platform was pitching to smaller retail investors, the focus is now purely on the sophisticated investor interested in lending debt capital to developers solely on a 1st mortgage basis.

The reality is, property development and investment are inherently risky and investors entering this space usually have substantial funds to invest, an appetite for risk and it’s not usually their first deal.

“There has been a lot of buzz around the ability of the online community via P2P and crowdfunding to open up the property industry to smaller retail investors. I learned from the Shark Tank that even the sharks don’t fully understand the risks and returns in property development; so obtaining investment from smaller “unsophisticated” retail investors is a hard sell.”

Since the Shark Tank pitch last year, David’s taken a measured approach to growing the CPC investment platform.

Teaming up with existing established private lenders, CPC has found its place in the market by offering 1st mortgage security investments yielding between 8 to 12% annually. The CPC website www.crowdpropertycapital.com.au showcases some of the available debt finance deals. This web-based platform provides wider access to potential investors both locally and offshore. All investments are debt style and start at a minimum of $500,000 AUD.

“CPC is essentially evolved into what I’d call a “trad-tech” investment platform. We are focusing on partnering with established private lenders to increase their investor base as there is a huge demand at the moment for non-bank finance.  

With the major banks reducing their exposure to development debt finance local developers are seeking additional funds to complete their project pipeline. 

Traditional private lenders have numerous quality deals with great returns that they are struggling to fund purely due to the gap that has emerged in the market from the majors scaling back. With the property market so hot at the moment, we are focused on cherry picking the best deals. Quality, not quantity is key.”

 

Core Logic – Hedonic Home Value Index November 2016

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The monthly update on Australian house and apartment values has been released showing some strong trends as we head into the end of the year. Property investment proved again in 2016 that it remains a reliable and profitable assett class outperforming the stock market considerably in 2016.

The key findings for November can be summarised:

  • All states posted dwelling value increases in the month (except Melbourne)
  • The annual rate of capital gain has remained boyant in all states (except Perth)
  • Rental yeilds in Hobart were the highest in the country. Hobart remains the most affordable city.
  • Sydney remains the least affordable city.
  • Interest rates are predicted to rise next year which may slow down buyer activity and in turn reduce buyer demand in 2017

To read the full report click here 

Core Logic – Monthly Housing and Economic Update Sept 16

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The monthly update on the state of the national housing market has just been released. The key findings can be summarised as

  • Residential real estate underpins Australia’s wealth and has reached $6.7 trillion
  • The annual rate of capital gain has slowed from its peak but remains quite strong
  • Values continue to fall in Perth and Darwin on an annual basis whilst rising across the remaining capital cities
  • Turnover: capital city transaction numbers have continued to trend lower
  • The decline in capital city rents continues with asking rents down 0.5% over the past 12 months
  • Lending to owner occupiers and investors has started to pick-up again

To read the full report click here 

Harnessing Potential – Alternative Lending Market in Australia

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KPMG has commissioned a report undertaken by the University of Sydney’s Business School  of over 500 alternative finance platforms in 17 Asia-Pacific countries and regions, capturing an estimated 70 percent of the visible market. As the first comprehensive study of the Asia-Pacific online alternative finance market, this research contributes to the growing body of data supporting the region’s potential.

Click here to view the full report.

Some key questions about the marketplace lending in 2016:

  • Are individual or business borrowers using marketplace/ peer-to-peer lending because they have failed to obtain nance from banks, or in fact do they prefer the speed, flexibility and services offered by the alternative finance platforms?
  • Do businesses that raise finance via an alternative finance platform perform better in terms of profitability, revenue and job creation against businesses that rely on traditional funding channels?
  • From a credit analytics perspective, how are alternative finance platforms using new forms of data to ascertain the creditworthiness of borrowers?
  • Are platform credit risk modelling and underwriting facilities sufficiently robust – particularly in comparison with traditional finance providers?

Read more

Federal Budget 2016/17 – Property Industry Backs the Budget

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On the same day the Reserve Bank lowered interest rates by 0.25% the Property Council have reinforced the push for planning reform to allow growth in the property industry. A key industry to the health of the Australian economy property remains a major focus of the 2016/17 budget.

Key Budget Measures

  • Government announcing its intention to leave the negative gearing and capital gains tax regimes unchanged and also no change to the GST rate
  • Provision of $4.6million in the next financial year to continue and expand the Cities Taskforce within the Department of the Prime Minister and Cabinet
  • Inclusion of more than $33 billion over the forward estimates in infrastructure funding for a raft of key infrastructure projects

Read more about the budget from a property perspective below:-

http://www.propertycouncil.com.au/Web/Content/Media_Release/National/2016/Growth_and_jobs_dependent_on_construction_growth.aspx