Sour relations between Beijing and Canberra dampen mainland Chinese investment in Australian property market

Investment in Australian property from both state-owned and private enterprises in China fell 29 per cent in 2020, and is on the decline again this year

Relations sank to a new low when Canberra criticised Beijing’s handling of the coronavirus pandemic, which was first detected in the central Chinese city of Wuhan

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A cyclist rides along Sydney Circular Quay. Before the tensions, Australia was a clear investment destination favourite among Chinese developers. Photo: Shutterstock

Published: 5:30pm, 18 May 2021Updated: 7:08pm, 18 May 2021

The worsening tensions between Canberra and Beijing have dampened the appetite of mainland Chinese for Australian property, with investments declining by 29 per cent in 2020, according to data from Real Capital Analytics (RCA).

Total investment in Australian property both from state-owned and private enterprises in China reached US$935.5 million in 2019, falling to US$664 million last year. As of the first quarter of this year, it was down to just US$22.7 million, according to RCA. The data tracked deals involving income-producing real estate such as offices, industrial and retail buildings, hotels, rental apartments and development sites for commercial and residential projects worth at least US$10 million.

“The tension in the international relations [between Canberra and Beijing] will affect foreign direct investments into Australia, including investments in its property market, where Chinese investors constitute one of the largest foreign investor groups in the country,” said Sing Tien Foo, director, Institute of Real Estate and Urban Studies at the National University of Singapore.

In 2018, mainland Chinese investment in Australian property reached US$2.5 billion, but relations started to fray that year when Australia banned Chinese tech giant Huawei Technologies from building its 5G network, the first Western country to do so. Since then, relations have deteriorated and are now perceived to be at their lowest point following Canberra’s criticisms of how Beijing handled the coronavirus pandemic, which was first detected in the central Chinese city of Wuhan.

Before the tensions, Australia was a clear investment destination favourite among Chinese developers, accounting for about a third of the residential development sites sold in 2018, according to property consultancy Knight Frank.

Zone Q, China Poly Group, Yuhu Group and Aqualand were just some of the mainland developers that had become active in the Australian property market, and had even diversified into office assets. Chinese developers had also on average purchased more than 25 per cent of the residential development sites that changed hands in the previous years.

About 11 per cent of all new apartments in Australia in 2018 were built by Chinese developers, with the share projected to rise to 22 per cent this year, according to the report released by Knight Frank in 2019.