New guidelines restricting Chinese corporate investment overseas could further compound a drop-off in new developments in the Australian property market.
Chinese regulators have formalised restrictions on outbound investment, that include real estate and hotel deals being placed on a ‘restricted’ list.
Analysts believe this will likely mean further scrutiny for developers seeking to move money out of China for property projects in Australia.
The guidelines seek to clarify an ongoing crackdown on Chinese capital outflows, with “irrational” investments in foreign entertainment and sport companies the main target.
But restrictions on property investment could affect new residential developments.
Thirty-eight per cent of residential development sites were purchased by Chinese companies last year, according to a Knight Frank market insight report.
“To some extent there are winners and losers — it remains to be seen exactly how it affects real estate investment, which has already slowed down since restrictions last November”, said Paul Schroder, a Partner at King Wood and Mallesons specialising in Chinese acquisitions.
“The clarity that regulators are now giving can only benefit Australian transactions because they are more likely to complete, people are more likely to be open to dealing with China and the timeframes are likely to be more reasonable,” he said.
China’s Government has moved to restrict corporate investment abroad over the past year after a surge of outbound deals pushed the value of the Yuan lower and caused concerns about capital flight.
Already individual Chinese property buyers have had to grapple with increasing enforcement of an annual $US50,000 limit on foreign currency purchases, forcing them to use more creative means to get money out of China to complete property purchases.
Some of the country’s largest companies have also come under recent pressure over foreign acquisitions, which has led to the unravelling of entertainment and hotel deals in the United States.
But Chinese investments in Australian resources, such as the recent purchase of Hunter Valley miner Yancoal, along with the service sector are unlikely to be affected by the new guidelines.
Acquisitions of technology companies, along with assets broadly related to infrastructure, are still being encouraged by Beijing.