Hello:
More than 550 apartment buyers will have their sale contracts cancelled after a Singapore-based developer scrapped plans for a residential skyscraper in Melbourne amid a legal stoush.
Developer Chip Eng Seng bought a commercial tower at 150 Queen Street in the Melbourne CBD in September 2011 and planned to redevelop it into an apartment block.
The new project, known as Tower Melbourne, was to be 71 storeys high with 581 units but instead it has become one of the first cancelled buildings in Melbourne in this cycle.
The group is considering its options for the site and could opt to sell the property.
Legal dispute, yada, yada, yada…but why sell it now?
Answer: because they’re smart. The question is, are they too late? From the AFR:
Chinese investment in Australian commercial real estate has slumped more than 70 per cent this year in the wake of the new capital controls put in place by Beijing, new figures show.
For the first nine months of the year, Chinese companies have invested just $1.83 billion in offices, malls, sheds, hotels and development projects compared with a whopping $7.1 billion invested in 2016 and $6.3 billion in 2016, according to Real Capital Analytics data.
Perpetual Corporate Trust head of sales and relationship management Glen Dogan said the Chinese government re-classifying foreign property development and hotels as restricted assets – rather than falling yields – was the “key driver for the pullback by Chinese investors into Australia”.
“Chinese investors were the biggest purchasers of development assets in 2016, but this year there has been a massive drop in development site purchasers as those [Chinese] buyers have not been here,” said Mr Dogan in a speech to the Atchison Consultants 11th Global Real Assets Forum in Melbourne this week.
Not only have Chinese buyers disappeared, but some like the massive Dalian Wanda Group have been reducing their local real estate exposure, with the Chinese conglomerate selling a majority interest in two flagship Australian developments in August – having initially denied it was doing so after The Australian Financial Review broke the story.
A commercial property bust of sorts is upon us. Prices could fall some way:
Local banks are exposed:
And Asian bank exposure will go out with the tide:
Remember, apartment construction has been the primary driver of Australian growth…
