New wave of Chinese investment coming

New wave of Chinese investment comingNorth-east Asian investors are looking overseas for high-quality assets with good returns. It’s exactly what they’ve found in Australia, says Paul Craig, managing director of international investments at Savills.On a recent trip to China, Craig concluded that Australia has only seen the beginning of Chinese and Taiwanese investment in Australia. Major institutions across the mainland and Taiwan, such as insurance companies and private investors, are looking to Australia at the same time that major institutions here are pursuing a deleveraging strategy with their portfolios.Prime office and retail stock, which has traditionally attracted offshore investment from German funds, REITs and private investors from Singapore and Malaysia, is now attracting what Craig calls a second generation of capital, led by Chinese and Taiwanese insurance groups.There are several reasons why the Australian property market is so appealing to the overseas investor. Not only is it highly transparent, says Craig, it also offers access to good-quality information, it has an easy-to-understand tax system and accessible consultants, and there is no sovereign risk. Current low interest rates and a weakened Australian dollar mean many foreign groups are prepared to make quick decisions to secure assets.Asian investors understand residential well, says Craig, particularly the recycling of old office buildings to residential or mixed-use, so he expects to see a keen interest in residential development. Another key target for foreign capital is old industrial infill sites that can be converted into residential developments.Craig forecasts that more Asian investors will venture into the resources states of Western Australia and Queensland. Perth’s market offers less volatility and better rates of return than other markets, and Brisbane’s market potential is increasing as tenants move from older properties to prime CBD offices, thereby creating greater opportunity for the repositioning of older stock.He also predicts that the interest in residential development will find its way to other major centres as the stock in sought-after cities depletes. Not only has the Sydney metropolitan market been active for some time, there is also an increasing amount of foreign capital moving to sites in the east and inner metropolitan areas of Melbourne.