Looking beyond the residential market—which has seen prices rise by 47 percent in the last four years according to Moody’s Analytics—Chinese investors are starting to pour funds into other sectors of Australian real estate.
More infrastructural projects are increasingly being acquired or eyed by China. Just this week, China Communications Construction Company’s Aussie subsidiary John Holland is part of a consortium that won the bid to build Melbourne’s Metro Tunnel project. Chinese firm, the Global CEO Fortune Club, launched its first overseas fund with an aim to invest in Australian infrastructure projects.
“Australia is particularly attractive to Chinese investors due to its mature market, stable legal system and political environment coupled with its geographic and time-zone proximity to China (with just a two or three-hour in difference),” says Michael Zhang, Head of the China Desk at JLL Australia.
“They [Chinese investors] have started looking at infrastructure because it’s a sector in which they’re experienced and competent – having built and operated high tech bullet trains, road networks and seaports that move hundreds of millions of people and billion dollars of goods on a daily basis. Naturally they want to utilise these experiences and skills in infrastructure projects in Australia.”
It’s not, however, always plain sailing for Chinese groups expanding Down Under with particular sensitivity over the presence of foreign firms in the country – especially within infrastructure. Last year, the Australian government stepped in to prevent the sale of Ausgrid to China’s State Grid Corporation and Hong Kong-based Cheung Kong Infrastructure over national security concerns.
The heightened scrutiny has seen more Chinese firms looking to partner with local companies as a way to add gravitas to their bids. To secure the Port of Melbourne project, the China Investment Corporation invested in local Australian infrastructure fund, Global Infrastructure Partners, which is part of the consortium that eventually succeeded in buying the port for US$7.3 billion.
According to Zhang, Chinese investment will continue in this space as the Australian pushes for infrastructure upgrades to replace aged and inadequate facilities. “It will also help create employment opportunities and encourage communities to build better infrastructure,” he adds.
Opening doors with infrastructure
The move towards infrastructure is also an opportunity for Chinese firms to build up experience and expand into other development projects. “It allows them to establish a local presence in Australia in their core industry before moving up the risk and reward curve into residential development,” observes Zhang.
With growing maturity in the outbound investment market, Chinese capital is becoming increasingly diversified in terms of asset classes, locations and methods of investment. The boom of Joint Ventures (JVs) is one such example, according to Zhang. “We anticipate more investments going into suburbs of major cities like Sydney and Melbourne), new destinations – Queensland, Adelaide and Perth as well as more joint venture transactions going forward,” he says.