Sydney Property Bubble

Apartments boom spreads further in Sydney’s north shore
KYLAR LOUSSIKIAN THE AUSTRALIAN MAY 08, 2014 12:00AM

Drawings for Chatswood Post Office site proposal.
Drawings for Chatswood Post Office site proposal. Source: Supplied
THE apartment boom on Sydney’s north shore shows no signs of slowing, with several ­developers moving closer to receiving planning approval for major projects totalling almost 1500 units.

The burst of new apartment projects in North Sydney and Milsons Point, led by the likes of The Crown Group and China’s Bridgehill, is now gaining traction in other centres.

Project proponents range from listed groups, developers and government authorities looking to maximise the value of their holdings.

One of the latest plays is the proposed redevelopment of the ailing Mandarin Centre in Chatswood owned by a syndicate controlled by developer ­Michael Teplitsky that has received the backing of Willoughby Council planners and will be presented to the council next Tuesday.

If the project, led by private groups Mandarin Developments and Blue Papaya, is approved, it could mean up to 244 additional units, totalling about 23,500sq m, on the market.

The total floorspace on that site would increase from the ­current 16,291sq m to about 39,200sq m, spread across a six-storey retail podium on the corner of Albert and Victor streets, and two residential towers 11 and 23 storeys high.

Planning documents prepared for Willoughby Council report “significant traffic and car-parking issues” remain unresolved. The documents also query the economic study prepared by Urbis, finding the basis for potential jobs is unclear “as figures mentioned in the study do not add up and are based on an earlier concept plan”.

But the report ultimately recommends the proposal be supported, citing the Mandarin Centre’s “poor street activation”, dated facade and problems with the internal layout. The revamp has also secured support from two existing tenants, Strike Bowling and the Gordon Club.

Another tower proposed nearby, on the Chatswood Post Office site, is to be sent to the state’s Joint Regional Planning Panel, after the NSW government decided the proposal had sufficient merit to proceed ­despite not having the support of Willoughby Council.

Australia Post is hoping the site will be rezoned to allow for up to 42 storeys. The new building would include about 210sq m of retail space on the ground floor, 1860sq m of commercial office space, and about 300 apartments.

The NSW planning authorities are also backing plans for major revamps at St Leonards proposed by Charter Hall Group and Leighton Properties. The developers have won support for a proposal to change the zoning on two sites fronting the Pacific Highway in St Leonards in March and are now preparing an application to council.

Charter Hall originally took plans to Lane Cove Council to build a 37-floor, 390-apartment residential block at 504 Pacific Highway. Leighton Properties is separately developing 520 units in two towers, one 34 and the other 24 storeys, at 472-486 ­Pacific Highway.

Mark Gray, managing director of Leighton Properties, said he looked forward to working with Lane Cove Council over the next few months. “It’s an exciting opportunity to revitalise the southern gateway to St Leonards with a mixed-use development,” he said. “It will include commercial, residential, retail and leisure amenity near to St Leonards train station.”

Charter Hall joint managing director David Harrison noted the potential of the site, which the group is likely to sell rather than develop itself.

$550m Promenade proves a star attraction for Chinese buyers
KYLAR LOUSSIKIAN THE AUSTRALIAN MAY 08, 2014 12:00AM

Promenade pull for Chinese buyers
An artist’s impression of the Promenade development. Source: Supplied
THE first stage of Chinese property developer Fuxing Huiyu’s $550 million Promenade project in Parramatta has sold out after unexpectedly strong demand over the weekend.

Hao Liu, director of Starryland, the subsidiary of Fuxing Huiyu tasked with the development in Sydney’s west, said the 124 apartments available to buyers sold out after just two days, and a further 153 apartments were to be reserved until displays were finalised in June or July. Savills is handling pre-sales.

Starryland is developing a 5ha residential estate on land it purchased last year.

The Shanghai-based group has been closely watched after it unveiled national ambitions by purchasing a Southbank property in Melbourne this year.

The Parramatta apartments sold to mainly Chinese buyers, who were interested in the Australian market because of restrictions on apartment purchases in China, according to Mr Liu.

“Another aspect is the cultural one,” he said. “Property is a favourite investment, and Chinese parents are especially buying for their kids.”

He said the company was already looking for opportunities in Sydney’s CBD, but was yet to identify a specific site.

Construction on the first stage of the Promenade project will begin late next month, Mr Liu said. Starryland is yet to obtain DA approval for the second stage of Promenade.

Although Parramatta Lord Mayor John Chedid was unaware of the specifics of that proposal, he was broadly supportive of the development. “This project is close to the CBD and that’s where it should be, close to the university and the foreshore,” Mr Chedid said. “It’s an appropriate location.”

Once completed, the development could include up to 11 towers. “Promenade is in keeping with the style of residential communities we create in China, and we want it to set a benchmark to establish our credentials in Sydney as a quality developer,” Mr Liu said.

“We selected Parramatta because it is already a cosmopolitan centre with the potential to become even better.”

There are already several other major projects planned for Parramatta, including the 3ha Parramatta Square precinct and the twin Altitude Apartments being developed by Meriton.

“These will be a combination of retail, residential and commercial, and over 30 storeys,” Mr Chedid said. “That’s what we want to see as a city: sustainable development that provides jobs and livelihood.”

Separately, Mr Chedid is still hopeful that a proposed 90-storey, 336m residential tower will be given clearance by the Sydney Airport Authority. The Mayor said he had spoken to Deputy Prime Minister Warren Truss about flight risks due to the tower’s height and redirecting flight paths away from the proposed building. “I’m hoping for a response sooner rather than later. We’d like to know before the end of June,” he said.

In the latest sign of the area’s growth, Colliers International has been appointed to sell a 4.85ha development site in Melrose Park that was rezoned ­allowing for mixed use development.

Harry Bui and Guillaume Volz of Colliers International have the property.

Hard slog for locals as China cash pours in
THE AUSTRALIAN MAY 10, 2014 12:00AM
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Sydney sites that can support up to 600 apartments are attractive to Chinese developers. Source: News Limited
MORE Chinese developers are entering Sydney’s real estate market, outbidding locals in their quest to build thousands of apartments.

The Shanghai-based Chiway Holding Group, a large privately owned corporation with a long record in real estate development and commercial property investment, has beep scouring Sydney for sites.

Not to be outdone, China’s second-biggest listed developer, Poly Real Estate Group, has also been scouting for large sites in Sydney’s suburbs as it looks to ­escape China’s cooling housing market.

“There is fairly strong evidence that the fact you can sell an apartment in Beijing for $700,000 and buy something for considerably less here is no doubt a factor explaining the current boom in apartments in Australia,” said prominent social researcher Bob Birell.

The developers are chasing sites that can sustain between 500 and 600 apartments, preferring to buy via off-market deals, rather than competing with seasoned local groups on the open market.

Scott Timbrell, JLL senior negotiator, metropolitan sales and investments NSW, said the developers were looking to capitalise on a wave of redevelopments and an under-supply of apartments. They were targeting sites in Sydney’s Epping, Hurstville and Campsie with strong Asian-born populations.

While Meriton in March picked up the last major site in Zetland, with a $47.5 million purchase in Epsom Road, a nearby site with approval for more than 600 units is being offered by JLL at more than twice this level and is gaining traction among the new breed of deep-pocketed Chinese investor.

Local groups are also cashing in on the offshore interest.

Greg Shand’s private Barana Group is dealing with a party at between $97m and $98m on a Milsons Point office tower that has been promoted as the suburb’s last significant harbourside residential development opportunity. CBRE and JLL are the selling agents for the 61 Lavender Street property.

The Goodman Group, which this week revealed it controlled a pipeline of 35,000 unit sites, is also capitalising. It sold a $73m site in North Ryde to China’s Country Garden, which is planning three landmark apartment towers.

Other Chinese players include JQZ, which is rolling out 1000 apartments across Sydney’s suburbs, and Starryland, which is undertaking a $550m project in Parramatta.

Property investment from China to the rest of the world jumped by 25 per cent to $US2.1 billion ($2.24bn) in the first quarter, compared with the same period in 2013, according to JLL figures. The US and Australian real estate markets attracted most of this capital from China over the quarter — with the US winning $US732m and Australia receiving $US400m.

JLL global capital markets research director David Green-Morgan said: “The residential development investment (by China) is up 80 per cent (from $US600m to $US1.1 billion), with the United Kingdom, Australia and the United States seeing most of the investment.”

China's 3rd and 4th tier cities are having a housing market bubble pop now. New apartments slashed by 30% and buyers outside the offices complaining. Apparently in China those guys pay for full price of apartment like 18months before its completed.

Those overleveraged greedy chinese developers some are starting to face insolvency. Big developer like US listed Sofun holdings is already trading almost half off its march high. I think singapore based i think oxley?? will be in some deep s**t soon as well as they are very very leveraged...

When crash comes it comes fast. Most property investors will not even know what hit them. Same thing will happen in Sydney/Melbourne. When fundamentals of rent vs prop price are not aligned things will eventually go to mean.

Steel and iron ore are also having major all time lows in commodity price due to glut in China as the building slows down.

This week the aussie government is increasing taxes to reign in their debt.

As the Zen master says, "We'll see"

No worries mate... need not be so negative.

(10-05-2014, 07:10 PM)BlueKelah Wrote: China's 3rd and 4th tier cities are having a housing market bubble pop now. New apartments slashed by 30% and buyers outside the offices complaining. Apparently in China those guys pay for full price of apartment like 18months before its completed.

Those overleveraged greedy chinese developers some are starting to face insolvency. Big developer like US listed Sofun holdings is already trading almost half off its march high. I think singapore based i think oxley?? will be in some deep s**t soon as well as they are very very leveraged...

When crash comes it comes fast. Most property investors will not even know what hit them. Same thing will happen in Sydney/Melbourne. When fundamentals of rent vs prop price are not aligned things will eventually go to mean.

Steel and iron ore are also having major all time lows in commodity price due to glut in China as the building slows down.

This week the aussie government is increasing taxes to reign in their debt.

As the Zen master says, "We'll see"

(10-05-2014, 07:10 PM)BlueKelah Wrote: China's 3rd and 4th tier cities are having a housing market bubble pop now. New apartments slashed by 30% and buyers outside the offices complaining. Apparently in China those guys pay for full price of apartment like 18months before its completed.

Those overleveraged greedy chinese developers some are starting to face insolvency. Big developer like US listed Sofun holdings is already trading almost half off its march high. I think singapore based i think oxley?? will be in some deep s**t soon as well as they are very very leveraged...

When crash comes it comes fast. Most property investors will not even know what hit them. Same thing will happen in Sydney/Melbourne. When fundamentals of rent vs prop price are not aligned things will eventually go to mean.

Steel and iron ore are also having major all time lows in commodity price due to glut in China as the building slows down.

This week the aussie government is increasing taxes to reign in their debt.

As the Zen master says, "We'll see"

1) You are right that Chinese properties are fully paid. And usually the LTV is about 50%. One phenomenon people forget why they are so cash rich is because 4 cash rich parents are supporting one newly married couple due to the 1 child policy. So in terms of credit risk to developers/ banks and eventual bust it will likely be more benigh, and as usual leverage will be the killer for developers. Soft landing is a highly likely scenario

2) I am negative on properties down under because of the resource cycle, but also do bear in mind that they have negative yield curve and negative rental yield for years before US QE.

(12-05-2014, 09:54 AM)specuvestor Wrote:

(10-05-2014, 07:10 PM)BlueKelah Wrote: China's 3rd and 4th tier cities are having a housing market bubble pop now. New apartments slashed by 30% and buyers outside the offices complaining. Apparently in China those guys pay for full price of apartment like 18months before its completed.

Those overleveraged greedy chinese developers some are starting to face insolvency. Big developer like US listed Sofun holdings is already trading almost half off its march high. I think singapore based i think oxley?? will be in some deep s**t soon as well as they are very very leveraged...

When crash comes it comes fast. Most property investors will not even know what hit them. Same thing will happen in Sydney/Melbourne. When fundamentals of rent vs prop price are not aligned things will eventually go to mean.

Steel and iron ore are also having major all time lows in commodity price due to glut in China as the building slows down.

This week the aussie government is increasing taxes to reign in their debt.

As the Zen master says, "We'll see"

1) You are right that Chinese properties are fully paid. And usually the LTV is about 50%. One phenomenon people forget why they are so cash rich is because 4 cash rich parents are supporting one newly married couple due to the 1 child policy. So in terms of credit risk to developers/ banks and eventual bust it will likely be more benigh, and as usual leverage will be the killer for developers. Soft landing is a highly likely scenario

2) I am negative on properties down under because of the resource cycle, but also do bear in mind that they have negative yield curve and negative rental yield for years before US QE.

there are many factors at play down under. negative gearing plays a big part on property buying behaviour there. unless u have first hand experience making a living down under and trying to minimise taxes in the process, it is very difficult for someone to understand the forces at play...

No Vested Interests

(12-05-2014, 10:55 AM)greengiraffe Wrote:

(12-05-2014, 09:54 AM)specuvestor Wrote:

(10-05-2014, 07:10 PM)BlueKelah Wrote: China's 3rd and 4th tier cities are having a housing market bubble pop now. New apartments slashed by 30% and buyers outside the offices complaining. Apparently in China those guys pay for full price of apartment like 18months before its completed.

Those overleveraged greedy chinese developers some are starting to face insolvency. Big developer like US listed Sofun holdings is already trading almost half off its march high. I think singapore based i think oxley?? will be in some deep s**t soon as well as they are very very leveraged...

When crash comes it comes fast. Most property investors will not even know what hit them. Same thing will happen in Sydney/Melbourne. When fundamentals of rent vs prop price are not aligned things will eventually go to mean.

Steel and iron ore are also having major all time lows in commodity price due to glut in China as the building slows down.

This week the aussie government is increasing taxes to reign in their debt.

As the Zen master says, "We'll see"

1) You are right that Chinese properties are fully paid. And usually the LTV is about 50%. One phenomenon people forget why they are so cash rich is because 4 cash rich parents are supporting one newly married couple due to the 1 child policy. So in terms of credit risk to developers/ banks and eventual bust it will likely be more benigh, and as usual leverage will be the killer for developers. Soft landing is a highly likely scenario

2) I am negative on properties down under because of the resource cycle, but also do bear in mind that they have negative yield curve and negative rental yield for years before US QE.

there are many factors at play down under. negative gearing plays a big part on property buying behaviour there. unless u have first hand experience making a living down under and trying to minimise taxes in the process, it is very difficult for someone to understand the forces at play...

No Vested Interests

1) Soufun Holdings operates an real estate Internet portal in China which provides marketing, e-commerce, listing, and other value-added services for China's fast-growing real estate and home-related sectors – It is NOT a real estate developer.
2) In China housing market, if LTV is less than 60%, and until prices falls more than 40%, banks would be adequately covered. Buyers who bought at the peak would be sitting on negative equity. And inevitably, property developers who suffered cash flow problems would be in trouble. Overall, housing prices still holding up pretty well in most cities in China, which one could read from Soufun.com
3) In the Sydney housing market, there are many market forces at work, one could talk about resource cycle, misalignment of rental yield vs prices etc – but the most fundamental imbalance is still “undersupply” – until this “imbalance” is “balanced”, the upward pressure on housing prices in the long run would still be northwards, IMO. In short to medium term, any likely downward pressure on prices would most likely to be driven by hike in interest rates from the RBA.

^^ I think it is overdemand rather than undersupply. This is not a play on words but what medicine to address the issue. The issue is where the demand is coming from. London is another one with a demand problem.

Singapore successfully addressed the demand problem. Actually the REAL PHYSICAL supply didn't change much if you look back 3 years ago, though on paper there was much rhetorics and structural redesign from MND which IMHO is the right thing to do. Cost nothing and solve the problem.

From my reading, RBA has successful engineered a revival in the housing and construction engine in Australia via its highly expansionary monetary policies since 1960s. RBA has correctly anticipated the winding down of mining based build up activities about 24 months ago and with the lowest interest rate regime since 1960s, they have kept Australian economy moving along despite the imploded fiscal position of the Australian government due to the previous Labour government and their response to GFC.

Australia has a big pool of renters relative to Singapore. Hence, there is constantly an undersupply of housing in the history of Australian economics. The various factors will then be in play to influence new housing starts and given that housing is a state matter, the different policies adopted by different state governments at different times will further complicate analysis of property cycle. In addition, the vast land mass also added further complexity.

Boon is correct, Sydney has been under supplied due to red tapes as a result of former governments and it appears quite apparent that supply is now catching up with upward price adjustments help change the equilibrium.

GG

(12-05-2014, 12:34 PM)specuvestor Wrote: ^^ I think it is overdemand rather than undersupply. This is not a play on words but what medicine to address the issue. The issue is where the demand is coming from. London is another one with a demand problem.

Singapore successfully addressed the demand problem. Actually the REAL PHYSICAL supply didn't change much if you look back 3 years ago, though on paper there was much rhetorics and structural redesign from MND which IMHO is the right thing to do. Cost nothing and solve the problem.