Sydney Property Bubble

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Investors own the inner city

Rebecca Thistleton
658 words
23 Oct 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.

Investors have bought up almost all the residential property around inner city suburbs – and more than 90 per cent in parts of Sydney.

The concentration backs suggestions that any macroprudential measures, mooted to stem investor-driven capital gains, could be effective if introduced based on location rather than according to buyer profile or through a blanket approach.

Concentrated rental accommodation is common around international city centres with bulging populations and the trend has spread to Sydney and Melbourne, RP Data figures show.

Official housing finance data shows investor mortgages represent 47 per cent of new mortgage commitments. Investment loan values rise almost 30 per cent year-on-year to August 2014.

Historically high investment levels has prompted the Reserve Bank and the prudential regulator to flag unspecified ­macroprudential measures.

This could be done through higher risk weightings for investment loans or limits on the extent of investment lending by the banking sector.

Reserve Bank deputy governor Philip Lowe said on Tuesday that keeping official rates too low for too long would generate new dangers and warned investors against taking risks.

RP Data head of research Tim Lawless said suburbs with high investor ­concentrations tend to be close to major employment and education nodes, ­capturing office workers and ­university students.

While rental demand remains strong, increased supply and a rise in ­values has led to yield compression for some owners.

Asking rents have fallen in the inner cities, particularly Melbourne and Perth.

Investors tend to buy apartments because they tend to be built near transport and employment precincts and are at a lower price point than houses.

Record low interest rates, self-managed super fund buying and offshore investment have all been cited as forces pushing up investment levels.

Mr Lawless said investors may be "buying blindly" if their decision-making came down to low interest rates and broad property sentiment rather than due diligence.

Housing finance to June this year was up 34 per cent in NSW, 30 per cent in Victoria, 21 per cent in Queensland.

Foreign Investment Review Board approvals are also at an all-time high. The vale of residential real estate approvals as a percentage of sales was about 13 per cent nationally- 24 per cent in Victoria and just under 15 per cent in NSW.

Westpac chief economist Bill Evans said he was most concerned about Melbourne where foreign investor levels were highest. Mr Evans said there was likely to be a surge in offshore investment as more mainland Chinese moved their money out of China. Mr Evans said the difference between mortgage rates and rental yields was "almost indiscernible". He expects interest rates to rise in the ­second half of 2015, depending on the world economy.

Property analyst and director of SQM Resesarch, Louis Christopher, said the impact of self-managed super fund purchases represented a mere portion of investment properties. "But I agree with the notion that there is a risk of self managed funds over-gearing towards property," he said.

"It's not a good way to diversify your portfolio, particularly if you own your ­primary residence."

Real Estate Institute of NSW president Malcom Gunning has criticised suggestions that further jawboning and macroprudential efforts are necessary to take some heat out of the property market.

"While we admit that low loan-to-value ratios of 5 per cent are dangerous, and that this practice should be curbed by the banks being asked to be more responsible with their lending, it is not the RBA's place to use interest rates to restrict the property market," he said.

"Using a broad tool such as interest rates to affect one sector of the market is unjust on all areas of the market and is inappropriate."

With SU-LIN TAN

Key points Data shows investor mortgages represent 47 per cent of new mortgage commitments. RP Data head warns buyers may be 'blindly' purchasing residential properties.


Fairfax Media Management Pty Limited

Document AFNR000020141022eaan0005e

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Sydney by Crown’s penthouse to top 12 months of elite property sales
THE AUSTRALIAN OCTOBER 25, 2014 12:00AM

Kylar Loussikian

Journalist
Sydney

ONE of Sydney’s most expensive apartments will hit the market next month as a buoyant luxury housing market and strong overseas demand lead to several big sales through the year.

Sydney by Crown’s penthouse, 142sq m on the top floor of the ­28-storey building, is likely to sell at just below $50,000 per square metre.

The three-­bedroom, two-bathroom apartment, developed by Iwan Sunito’s Crown Group, will be surrounded by an “oasis” water feature, ­according to architect Koichi Takada. “It will be like a pavilion on a ­remote island, except it’s on top of a building in the middle of the city,” he said.

“It’s nice to have a connection from the inside to the outdoors, and Sydney’s climate allows us to do that.”

A series of big sales over the past 12 months has brought ­renewed confidence into the market. Ben Stewart, a CBRE agent marketing luxury apartments, said overseas interest was strong.

“We’ve had some great sales: the penthouse at the Residence at Hyde Park sold for around $48,000 per square metre, and that was sold to an overseas buyer.”

Another prestige apartment, in Barangaroo, sold for $40,000 per square metre, he said.

But Sydney prices are still a far cry from those in some other major cities. The world’s most expensive penthouse will be in Monaco’s Odeon Tower, the principality’s first skyscraper in 30 years. The 3530sq m apartment is said to be valued at more than $475 million.

A two-floor penthouse on the top of the 33-storey Boulevard Vue development near Singapore’s prestigious Orchard Road has a price tag of about $50m, and comes with a private rooftop pool.

Mr Stewart said Australia could see apartments at those prices in the near future, pointing to a possible $30m apartment in Sydney’s Gold Fields House. James Packer’s Crown casino in Sydney could also include a penthouse worth $100m.

A penthouse takes up the ­entire 11th floor of the famed Bennelong Apartments overlooking Sydney Harbour. Bennelong, previously owned by the estate of the late Cyril Maloney, has been on the market since February. The 715sq m apartment includes three bedrooms, five bathrooms and a billiard room. Mr Stewart has now been appointed to sell it.

He said it was being marketed overseas, and a campaign started on Thursday targeting Hong Kong, Singapore and Shanghai.

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http://www.valuebuddies.com/thread-5842-...l#pid98058

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Perich Group MD fears investors inflating housing bubble
THE AUSTRALIAN OCTOBER 27, 2014 12:00AM
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Damon Kitney

Victorian Business Editor
Melbourne
Investor glut shutting out buyers
Tony Perich. “People are going to start to get scared of the market.” Source: News Corp Australia
ONE of the biggest land developers in Western Sydney, Perich Group managing director Tony Perich, says he is concerned about a housing bubble in Australia and says there are too many investors in the market that are pricing out first-home buyers.

“It worries me a lot,’’ he told The Australian when asked about his fears of a potential bubble.

“People are going to start to get scared of the market. Are there too many investors in the market? There probably is.

“I worry about investors at times. First-home buyers should always be first in the line and they are not.’’

The Perich family’s Greenfields Development Company controls thousands of housing lots in Western Sydney, a 50 per cent stake in the Narellan Town Centre, and the 1100ha Oran Park Town project in southwest Sydney.

The group has formed landmark joint-ventures with state government developer Landcom at Oran Park and worked jointly on other sites with partners.

The family’s Oran Park Podium shopping centre boasting the largest Woolworths supermarket in Australia opened its doors last month and Tony Perich has just been named the Urban Taskforce Property Person of the Year.

Mr Perich said the market was “getting too expensive in a lot of areas.’’

“What we have tried to do in the west and the southwest in particular is keep the land prices down. They are still very affordable. We haven’t pushed the prices up like everyone else has. You can still buy in our area for a reasonable price.

“We could put a lot higher prices on our blocks and still sell them, but we haven’t,’’ he said.

But he added that Greenfields had “20,000 lots to sell.’’

“So far we have sold 2,000. So we have a long way to go. And we will have some ups and downs in that period.

“So if we can keep it at a sensible price, we think the market will keep coming out there.

“You can buy a block out there for $250,000 to $300,000. The price is going up, but not like it is everywhere else.’’ After Mirvac Group chief executive Susan Lloyd-Hurwitz said last week that limiting negative gearing tax breaks for investors would pose serious risks to the stock of rental properties available, Mr Perich agreed that negative gearing was ‘’important.’’

“If not for it, no one would be investing. You need investors because not everyone can afford to buy straight up. They need to rent,’’ he said.

On the outlook for interest rates, Mr Perich said he would be concerned if there was a substantial increase over the coming years as the economy improves and the Reserve Bank moves to cool the housing market.

“If they were to go up 2-3 per cent it will be a disaster,’’ he said.

“If its just 0.5 per cent, I think we will be right. It all depends on the price of land.’’

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Greenland to rejig plans for Leichhardt development
THE AUSTRALIAN OCTOBER 30, 2014 12:00AM

Sherwood Luo says Greenland is confident of its proposal for the site in Leichhardt, in Sydney’s inner west Source: News Corp Australia

CHINESE development giant Greenland is preparing new plans for its site in Sydney’s inner western suburb of Leichhardt after the planning authorities rejected its initial proposal.

Greenland Australia managing director Sherwood Luo said the group would aim to lodge a new development application by Christmas.

“We are looking forward to working with the council to submit a fully compliant DA,” Mr Luo said.

The state-owned group bought the former Kolotex site, at 22 ­George Street, last year for about $47 million and planned to begin apartment sales at the $200m project this month.

Its first development application submitted in June showed plans to build 288 apartments over five buildings of four to nine storeys. It also planned two commercial buildings, an underground car park and garden areas.

But while the NSW government supported Greenland’s project, Leichhardt Council opposed it on the back of community concerns about development in the area. The planning authority, the Joint Regional Planning Panel, sided with the council on Friday. Among its concerns, the panel cited that the apartments may not receive adequate sunshine in midwinter and that the buildings did not fit in with the surrounding area.

It was also concerned about contamination on the site.

Mr Luo told The Australian yesterday that the group had been in talks with Leichhardt Council about its amended plans and that the council had indicated it supported them.

“We expect a positive outcome,” he said.

Earlier this week Greenland submitted its bid for the multi-billion-dollar mixed-use project at Brisbane’s Queens Wharf, with its joint venture partner James Packer’s Crown Resorts.

As part of the bid, Greenland is pitching to build the hotel, apartment and commercial component, while Crown will manage the casino.

Mr Luo said the group was scouring for more development sites in Melbourne, Sydney and Brisbane. “Greenland is always in hunting mode. Whenever a site passes our feasibility test then we will buy it,” he said.

He rejected claims made to The Australian last week by prominent Brisbane developer Kevin Miller, who said there were too many apartments planned in the city.

“There is a strong growth in demand for apartments in Brisbane, which is why we are confident about it,” Mr Luo said.

“It is currently undervalued in terms of median house price and there is room for it to catch up.

“We believe this market is trending up.”

He added that the group expected more interstate migration to the city as its economy improved.

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Inner city sale realises huge gain for EG Funds
THE AUSTRALIAN NOVEMBER 06, 2014 12:00AM

Kylar Loussikian

Journalist
Sydney
FUND manager EG Funds Management has sold an inner-Sydney retail and office property for $50.25 million, a price 37 per cent higher than it paid for the building just three years ago.

The Surry Hills property, known as Room Four, has 4520sq m of office space and food and beverage outlets, and was purchased by EG in 2011 for $36.5m. The sale reflects a passing yield of 6.6 per cent.

It’s thought the property, which was part of EG’s Yield Plus Infrastructure Fund, was purchased by a high-net worth investor based in Queensland. The sale was brokered by CBRE and Chesteron International.

Dan Farley, EG’s associate director, said the funds would be returned to investors and not used to buy other assets.

“We are extremely happy with the sales result, and we feel that this sale reflects both good buying and good selling, given the excellent location, quality build and future potential for increased density,” he said.

The two-storey building is located on busy Crown Street, one of inner-Sydney’s most visited entertainment precincts.

There is potential to develop the building into a mixed-use project with a significant residential component.

EG has pushed aggressively into the residential property development sector recently, with a $3 billion pipeline of more than 2500 apartments.

It had traditionally focused on property advice and funds management.

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HK’s Golden Horse group acquires Goodman site in Sydney for $300m
THE AUSTRALIAN NOVEMBER 07, 2014 12:00AM

Greg Brown

Property Reporter
Sydney
HONG Kong developer Golden Horse Holdings has emerged as the surprise buyer of a massive residential site sold by Goodman Group in Sydney’s inner south for more than $350 million.

The deal is one Australia’s biggest sales for residential conversion and is part of a wave of Asian capital that is pouring into the residential development space.

Office towers with residential conversion potential are expected to sell to other Asian groups this year, with Hong Kong-listed Shimao Holdings thought to be closing in on 175 Liverpool Street in Sydney for about $400m, while Asian developers are running the ruler over harbourside gem Gold Fields House overlooking the Sydney Opera House.

The Goodman site sold to Golden Horse’s local arm, GH Properties, spans about 7ha in the suburb Erskineville. The site has the potential for about 1765 residential dwellings.

It will signal the entry of Golden Horse into the Sydney market and will easily be its most ambitious Australian project. In Queensland, the group is planning a 251-apartment tower in Brisbane’s inner city Milton and in January it bought the Noosa Springs Golf Resort and housing development site.

Last December it purchased a site on the Gold Coast’s Hope ­Island with a view to building a 400-room hotel, and a majority shareholding in Hope Island Golf Links Resort.

The parties and the agent thought to have brokered the Erskineville deal, Colliers International’s Michael Crombie, declined to comment.

The Australian revealed yesterday that Goodman had sold the site, which includes 57 Ashmore Street and 165-175 Mitchell Road, but the buyer was not identified. Last month the company said it had $500m of urban renewal sites on the market, under due diligence or sold in Australia and Britain.

The group holds industrial parks that have the potential to be converted into more than 35,000 unit blocks in inner-city locations across Australia and has been selling since last year.

Hong Kong-listed Country Garden bought a North Ryde site from Goodman earlier in the year and is now building a $500m apartment complex.

Golden Horse is registered in Hong Kong and owned by Feng Di, who owns a PGA-competition 54-hole golf resort in Guangzhou in southern China. The Golden Horse group owns 20 other properties and has developed 3 million square metres across mainland China, its website says.

Asian groups have been active in Sydney recently. Shanghai-backed Aqualand has bought large sites in Melrose Park and North Ryde, while Yuhu Group acquired a North Sydney office tower with plans for an apartment conversion. And Dalian Yifang Group bought an amalgamation of homes in northern Lane Cove for about $63m.

ADDITIONAL REPORTING: MAGGIE LU YUEYANG, TURI CONDON

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Cities ‘need a long-term vision’, says UrbanGrowth NSW chief
THE AUSTRALIAN NOVEMBER 13, 2014 12:00AM

Kylar Loussikian

Journalist
Sydney
Cities ‘need a long-term vision’
Dexus chief Darren Steinberg at the chamber of commerce property lunch yesterday. Picture: David Moir Source: News Limited
AUSTRALIAN capital cities will fall behind other world cities if they don’t work out what they want to look like in the long term, UrbanGrowth NSW’s chief executive told a panel audience yesterday.

David Pitchford, who heads the state-owned urban renewal authority undertaking the redevelopment of more than 160 hectares of inner-city Sydney, warned the absence of a metropolitan plan for the city would see it fall behind Singapore as Asia’s leading city.

Mr Pitchford told the Australia-Israel Chamber of Commerce property lunch in Sydney that Singapore had understood far earlier than Sydney that it was important to build to a vision.

Darren Steinberg, chief executive of Dexus Property Group, agreed with Mr Pitchford, and said Sydney had been a “dumb city” on the back foot because of a “lack of focus on planning and development”.

“Development plays out through political cycles, and there needs to be a plan across all capitals to allow us to compete as a country,” Mr Steinberg said.

An obsession by governments with releasing cheaper, greenfield sites on the edge of cities had to end, Mr Pitchford said, because no one wanted to live there and it was more expensive to add transport.

Just last week the NSW government announced the release of land on the southwestern edge of Sydney that could hold up to 11,000 new homes. But it has also given the go-ahead for two of the biggest infill developments in Australia’s history, at the Central to Eveleigh and Bays Precincts.

Next week UrbanGrowth will convene a two-day summit to discuss the future of the Bays Precinct, a project that takes in 80ha of development space and 90ha of harbour.

Mr Pitchford said he would start in a “fundamentally different place” that would ensure infrastructure was developed alongside the bulk of the project. He implicitly savaged the federal government’s focus on providing road transport, warning that “widening a road” was not the right answer.

“There is a loss of productivity having to spend three hours in a car. In (other cities) you can do work taking a train, but we spend it in the car listening to some bloody idiot on the radio,” he said.

Mr Steinberg also said there was an “overemphasis” on roads over other transport.

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China-born billionaire pays $400m for Sydney Office tower
THE AUSTRALIAN NOVEMBER 13, 2014 12:00AM

China-born billionaire pays $400m for tower
Chairman of Shimao Property Holdings, Hui Wing Mau. Picture: Bloomberg Source: Supplied

INTERESTS associated with Hong Kong-listed Shimao Property Holdings and its chairman — Australia’s richest Chinese-born citizen, billionaire Hui Wing Mau — have bought a Sydney CBD office building with apartment and hotel conversion potential for about $400 million.

The building, at 175 Liverpool Street, is the second CBD office tower bought by an Asian developer in the past two weeks following Vision Investment Group’s purchase of 233 Castlereagh Street on Friday.

CBD office towers at 1 Alfred Street and 338 Pitt Street are also being circled by Asian developers.

The Australian foreshadowed the Liverpool Street deal in September.

Mr Hui, who was this year ranked sixth on the BRW rich list, ahead of Harry Triguboff and Andrew Forrest, is the chairman of Shimao. It is thought that the group aims to hold the building as an investment for about a decade before undertaking a development.

The 28-level tower has Hyde Park views and a net lettable area of about 46,320sq m.

It was sold by Singaporean investment giant GIC Real Estate, which picked up the Liverpool Street tower for $125m in 1996 and has since built a multi-billion-dollar portfolio of office towers, shopping centres and hotels across Australia.

The parties and the agents on the deal, JLL’s Paul Noonan, Simon Storry and Rob Sewell and CBRE’s Richard Butler and Josh Cullen, declined to comment yesterday.

Mr Hui, 64, known formally as Xu Rongmao, is worth about $6.35 billion and has held an Australian passport since 2004. It is believed he has dual Australian-Hong Kong nationality.

He was reportedly the eldest of eight children and grew up poor in the Fujian Province, on mainland China’s southeast coast.

In the 1970s, he emigrated to Hong Kong, where he worked in a textile factory. During the 80s he accumulated a portfolio of factories and was China’s first owner of a three-star hotel after the government liberalised investment laws, according to BRW.

He founded Shimao Property in 2001, which listed on the Hong Kong Stock Exchange in 2006.

Mr Hui reportedly undertook several property ventures in Australia during the 90s and later completed an MBA at the University of South Australia.

Last week, Hong Kong developer Golden Horse Holdings bought a massive residential site from Goodman Group in Sydney’s inner south for more than $350m. It was one of Australia’s biggest ever land sales.

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Gold Fields House in Sydney attracts interest
THE AUSTRALIAN NOVEMBER 13, 2014 12:00AM

Greg Brown

Property Reporter
Sydney
ABOUT eight international and local groups are vying to buy one of Sydney’s leading residential conversion development sites, 1 Alfred Street at Circular Quay.

The building, Gold Fields House, is being sold by a consortium led by private equity giant Blackstone with a price tag of about $400 million. Any development play is expected to yield some of Sydney’s most luxurious apartments, with previous plans including a $30m penthouse.

Lend Lease and Hong Kong-listed Shimao Property are understood to be bidders.

Lend Lease plans an office tower on the same block and buying the tower would give it a bigger presence in the precinct. It owns the two old Westpac office buildings on the block and the Jacksons on George pub.

Shimao is controlled by Australia’s richest Chinese-born citizen, billionaire Hui Wing Mau.

Another Hong Kong group, private equity real estate firm Joint Treasure, has visited Sydney and has shown interest in the tower. It has been a big investor for more than two decades and this year snapped up the Marriott London Grosvenor Square for just over £125m.

China’s Dalian Wanda is also thought to be among the bidders.

The parties and the agents on the Gold Fields deal, CBRE and JLL, declined to comment.