Chinese investment in Australian residential markets to keep growing in 2015

Chinese investment in Australian residential markets is expected to continue to grow in 2015, fuelled by the recently signed China-Australia Free Trade Agreement (ChAFTA), a report from real estate consultancy Knight Frank shows.

The ChAFTA will come into effect later this year when the respective parliaments approve the legislation. It is the latest in a number of China-led free-trade initiatives in the Asia-Pacific region, including trade deals with New Zealand, ASEAN, Singapore and more recently, South Korea.

The China-Australia deal could provide a significant boost to the Australian economy, as it trades more freely with its largest export market while also gaining access to 1.4 billion Chinese consumers.

From a real estate perspective, the shot in the arm to economic activity will encourage positive momentum in Australian commercial occupier markets, while investment volumes between the countries will likely continue on their upward trajectories, according to Nicholas Holt, Asia Pacific Head of Research at Knight Frank.

"With private investment under $830,000 no longer subject to the approval of Australia's Foreign Investment Review Board (FIRB), coupled with the on-going relaxation of outbound capital rules in China - we expect Chinese investment in the Australian residential markets to continue to grow in size," Holt said.

Over AU$4 billion was invested in Australia by Chinese investors in 2014, across both commercial and development sites. This exceeded the total Chinese inbound real estate investment of the past five years.

"This capital inflow has continued apace, with almost AU$2 billion transacting in 2015 to date and various large-scale investments being made across the hotel, office and development-site sectors," said Matt Whitby, Knight Frank's Group Director of Research & Consulting for Australia.

The ChAFTA has raised the threshold for private, non-State-owned investment from China in non-sensitive sectors, such as property, to go to the Foreign Investment Review Board, from AU$248 million to AU$1.08 billion. This will increase the flow of Chinese investment funds into the Australian property market.

"We expect to see flow-on effect from increased activities into Australia boosting the nation's commercial and residential markets," said Matt Whitby.