<p>Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.</p>

<p>Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;</p>

<p>David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;</p>

<p>“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;</p>

<p>[smartcode_project:default project_id=110291 project_image_fid=302785]</p>

<h2>Affordable product leads, premium demand remains resilient</h2>

<p>Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;</p>

<p>Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;</p>

<p>At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.</p>

<p>Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.</p>

<p>Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;</p>

<p>[smartcode_project:default project_id=148957 project_image_fid=364102]</p>

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

<p>Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.</p>

<p>David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.</p>

<p>“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;</p>

<p>Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.</p>

<p>[smartcode_project:default project_id=108869 project_image_fid=317905]</p>

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

<p>While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;</p>

<p>Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;</p>

<p>However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.</p>

<p>Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;</p>


Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<p><a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.</p>

<p>The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.</p>

<p>Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.</p>

<p>“Brisbane was the right step for Sammut,” Sammut said.</p>

<p>“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”</p>

<p><img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" /></p>

<p>Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.</p>

<p>The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.</p>

<p>“We are DA approved now which is very exciting,” Sammut said.</p>

<p>“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”</p>

<p><img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" /></p>

<p>Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.</p>

<p>“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.</p>

<p>The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.</p>

<p>“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”</p>

<p>The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.</p>

<p>The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.</p>


Sammut secures approval for debut Brisbane apartment development in Toowong

<p>Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.</p>

<p>Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.</p>

<p>The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.</p>

<p>“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.</p>

<p>“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.</p>

<p>“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”</p>

<p>The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.</p>

<p>“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”</p>

<p>From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.</p>

<p>“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”</p>

<p>The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.</p>

<p>“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.</p>

<p>Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.</p>

<p>“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.</p>

<p>“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”</p>

<p>The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.</p>

<p>“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.</p>

<p>Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.</p>

<p>&nbsp;</p>


Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

<p>Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.</p>

<p>The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.</p>

<p>It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.</p>

<p>With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.</p>

<p>“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.</p>

<p>“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”</p>

<p><img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" /></p>

<p>GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.</p>

<p>“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”</p>

<p>Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.</p>

<p>“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.</p>

<p><img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" /></p>

<p>&nbsp;</p>

<p>One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.</p>

<p>Green praised local policy settings.</p>

<p>“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”</p>

<p>One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.</p>

<p>“The way we will be able to achieve economies of scale is through size,” Green added.</p>


One Living enters Sydney's new apartment market with Northern Beaches site acquisition

<p>It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.</p>

<p>Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.</p>

<p>Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be</p>

<p data-end="683" data-start="511">"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.</p>

<p data-end="882" data-start="690">"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."</p>

<p data-end="882" data-start="690">[smartcode_project:default project_id=134646 project_image_fid=6109]</p>

<p>The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.</p>

<p>The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.</p>

<p>Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6110]</p>

<p>Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.</p>

<p>The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6116]</p>

<p data-end="247" data-is-last-node="" data-is-only-node="" data-start="0">While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.</p>

<p>WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.</p>

<p>With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.</p>

<p>[smartcode_project_cta:default project_id=134646]</p>


WM Residences fills gap in Mordialloc townhouse market

China

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<p class="p1">EXPERT OBSERVATION</p>
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<p><span>Juwai's The </span><span>Foreign Buyer Restrictions Report 2018-19 has found that </span><span>the world will see fewer new foreign buyer restrictions imposed in top Chinese property destinations in the year ahead than in any of the prior three years. </span></p>
<p>The Report points out that Canada’s two largest provinces, six of Australia’s eight states and territories, and Australia’s national government have all increased the taxes or restrictions that apply to foreign buyers of real estate over the past two years.</p>
<p>By contrast, in the year to come, only New Zealand is likely to impose new policies targeting foreign buyers. New Zealand’s Overseas Investment Amendment Bill is now under consideration in Parliament.</p>
<p><span>The </span><span>rapid upward trend in Chinese international property investment of the past decade hit the world at the same time as historically low interest rates and population growth were inflating values in popular destination cities. In some places, especially Canada, Australia, and New Zealand, Chinese buyers were blamed for the price increases that objective data suggested was actually due to other factors. </span></p>
<p><span>After </span><span>retreating from an exuberant peak in 2016 of $101.1 billion, Chinese international real estate investment again appears to be on a growth path, although more steady and restrained that what we saw in that golden year. The Chinese government seems comfortable with what it calls </span><span>‘rational’ </span><span>growth in international investment. </span></p>
<p><span>Beijing </span><span>has already telegraphed that it may experiment with further loosening capital controls. China has already resumed two key outbound schemes for investment in overseas securities, which had been suspended to reduce capital outflows. These have no direct impact on foreign property buyers, but do reveal a change of direction </span><span>— </span><span>from tightening to loosening. The Financial Times has reported it expects some of the controls introduced over the past two years to be </span><span>‘quietly relaxed.'</span></p>
<p><span><strong>AUSTRALIA</strong><br></span><span>The </span><span>Reserve Bank of Australia, the Australian Treasury, and a Parliamentary inquiry have all found that foreign buyers do not cause house-price inflation in Australia. The national government and six of the eight states and territories have none-the-less found it hard to resist targeting this group with no voice in the political process. Taxing foreign buyers gives state governments the appearance of taking action without having to tackle stamp </span>duty and the planning mechanisms that are a major cause of the affordability crisis. The top Australian destinations for Chinese buyers are Melbourne, Sydney, Brisbane, Adelaide, and the Gold Coast – followed by Canberra and Perth.</p>
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<p><span><strong>CANADA</strong><br></span><span>Canada </span><span>has seen high bars placed in front of new foreign property buyers over the past two years. But we think that in 2018</span><span>–</span><span>19 it is unlikely that new restrictions or taxes will be imposed. New mortgage regulations have weakened the market, by dampening the primary drivers of higher prices, which is local buyers taking advantage of low interest rates to trade up or buy investment homes. </span></p>
<p><span>The </span><span>most popular Canadian destinations for Chinese buyers are Toronto, Montreal, Vancouver, Calgary, and Ottawa. </span></p>
<p><span><strong>NEW ZEALAND</strong><br></span><span>New </span><span>Zealand is the sole major investment destination in the world that we consider to be very likely to impose new foreign buyer restrictions this year. The Overseas Investment Amendment Bill with its recent amendments would have the advantage of finally putting to an end the political uncertainty that has been ongoing since before the last election. </span></p>
<p><span>The </span><span>most popular destinations in New Zealand for Chinese buyers are Auckland, Christchurch, Wellington, Queenstown, and Hamilton. </span></p>
<p><span><strong>THAILAND</strong><br></span><span>In </span><span>Thailand, new restrictions on foreign homebuying do not appear likely. Weak economic growth and the desire to tap overseas investors for the massive Eastern Economic Corridor project play role. Thai nationals are already protected by rules that prevent foreigners from owning land and more than half of the units in apartment buildings. </span></p>
<p><span>The </span><span>most popular destinations for Chinese property buyers in Thailand are Bangkok, Pattaya, Chiang Mai, Phuket, and Ko Samui. </span></p>
<p><span><strong>UNITED KINGDOM</strong><br></span><span>In </span><span>the UK, the only potential legislation restricting foreign homebuyers that we foresee would address illegal Russian investment, not other buyer groups. We believe anxiety about the potential property-related impact of Brexit, currently weak markets, a dependency on foreign luxury in London buyers, and the </span><span>UK’s </span><span>proud tradition as a financial and investment center will prevent other measures. </span></p>
<p><span>The </span><span>most popular destinations in the UK for Chinese buyers are London, Manchester, Liverpool, Birmingham, and Edinburgh. </span></p>
<p><span><strong>UNITED STATES</strong><br></span><span>The </span><span>United States offers the freest market, the largest market, and the most diverse market of any major investment destination for Chinese property buyers. </span><span>That’s </span><span>why it attracts the greatest amount of investment year after year. We foresee no new restrictions in the US this year, except perhaps for legislation that prevents the acquisition of real estate near critical military bases. The EB-5 visa program is also a perennial candidate for reform. While changes to the investment visa program with the deed affect Chinese nationals, it is not a residential property investment policy. </span></p>
<p><span>The </span><span>top American destinations for Chinese property buying are Seattle, Los Angeles, New York, Houston, and Orlando.</span></p>
<p><span>Carrie Law is the CEO and director of Juwai.com, the No. 1 Chinese international real estate website and the exclusive international real estate partner to Chinese online giant Tencent.</span></p>
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jrobinson-rf4aSBido9

New taxes targeting Chinese property investment set to drop worldwide: Juwai

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<p>GUEST OBSERVATION</p>
<p>Chinese direct investment in Australia has declined, according to a new report by the University of Sydney and KPMG. In 2017, the value of investment fell by 11% in US dollar terms, from $11.5 billion in 2016 (A$15.4 billion) to $10.3 billion (A$13.3 billion).</p>
<p>In early 2018, we also surveyed nearly 50 Chinese executives in Australia. The responses show Chinese investors are feeling apprehensive and reluctant to engage in a climate of insecurity created by current debate about China’s role in Australia.</p>
<p>The investment drop occurred in nearly all areas of Chinese investment in Australia, including:</p>
<ul>
<li>commercial real estate, where investment was down 22%</li>
<li>infrastructure (-89%)</li>
<li>food and agribusiness (-8%)</li>
<li>renewable energy (-64%)</li>
<li>oil and gas (-84%).</li>
</ul>
<p>Growth occurred in mining and energy, with a 448% increase in investment, health care (20%), transport (2%) and smaller areas such as services and manufacture (38%).</p>
<p><iframe style="width: 0; min-width: 100% !important;" src="https://datawrapper.dwcdn.net/apBQJ/2/" frameborder="0" scrolling="no" width="100%" height="541"></iframe></p>
<p>The decline in Chinese investment does not come as a surprise. Chinese outbound investment in all countries was down 29% in 2017. Chinese investment in the United States fell by 35% and in the European Union by 17% after large increases in 2016.</p>
<p>Some of this is a result of actions by Chinese regulators since late 2016. They have targeted speculative “irrational” investment and capital flight, grouped outbound investment into three categories – prohibited, restricted and encouraged – and directly intervened in some high-profile international transactions. However, the new regulations and the curb on speculative investments only marginally affect Australia.</p>
<p>The more important news is Australia did not pick up increased Chinese investment in the encouraged industries, namely services, agriculture and infrastructure. These are areas where Australia has strong competitive advantages and is highly complementary to Chinese economic interests.</p>
<p>Combined Chinese investment in Australia’s agribusiness, infrastructure, renewable energy and services halved in 2017. Commercial real estate, the second-largest area behind mining in 2017, has fallen two years in a row.</p>
<p><iframe style="width: 0; min-width: 100% !important;" src="https://datawrapper.dwcdn.net/pUfi9/1/" frameborder="0" scrolling="no" width="100%" height="285"></iframe></p>
<p>The only two growth areas in the encouraged category were mining and health care. <a href="https://www.propertyobserver.com.au/http://www.abc.net.au/news/2018-06-06/lithium-booms-shows-no-sign-of-slowing-as-new-refinery-announced/9840914" target="_blank">Lithium mining</a> and <a href="https://www.australianmining.com.au/news/rio-tinto-waves-goodbye-coal-allied/" target="_blank">Yancoal’s A$3.4 billion acquisition of Rio Tinto’s thermal coal assets</a> boosted mining investment. Health-care investment rose by 20% with several large investments in health service providers and supplements.</p>
<p>Two structural trends have underpinned the decline in investment volume. First, private investors with smaller investment volumes are crowding out larger investments by state-owned enterprises. Second, investment by new entrants is declining in favour of repeat investors.</p>
<p>The report adds fuel to the debate about the Australian government’s political stance towards China and its impact on economic relations. If the intent was to slow down Chinese investment in Australia, this has been achieved.</p>
<p><strong>Feeling less welcome</strong></p>
<p>In our survey, more than half of our respondents either agreed (48%) or strongly agreed (4%) that they felt less welcome in Australia, compared to just over one-third (35%) of respondents in 2014.</p>
<p>Asked about the level of support from major stakeholders, Australian media received the lowest rating overall. Business leaders were seen as the most supportive group. State governments and local councils were also given positive ratings.</p>
<p>Local communities were seen as less supportive, ahead of the federal government. The Foreign Investment Review Board (FIRB) received the lowest government rating.</p>
<p>Two-thirds (67%) of respondents strongly agreed (17%) or agreed (50%) agreed that the federal government was less supportive of Chinese investment than previously. A slightly higher number (70%) stated that the political debate about China had made their company more cautious about investing in Australia.</p>
<p>Half of the respondents (52%) felt that Australia was a safer place to invest than many other countries, down from 63% in 2014. The majority view was in spite of problems such as higher business costs than in the United Kingdom, United States and Canada, difficulties in finding qualified staff, and communication issues with local staff and management.</p>
<p>The Chinese investors’ evaluation of business success over the past three years and the outlook for the year ahead confirms their overall positive attitude towards Australia. Growth in turnover and profitability was reported by 65% percent and 45% of respondents respectively.</p>
<p>For 2018, a similar number of respondents expect growth in turnover (64%) and profitability (42%). Half of the respondents (49%) expressed optimism about business prospects for the year ahead.</p>
<p><strong>Politics plays into business</strong></p>
<p>Personal interviews with a smaller number of local Chinese companies confirmed the prevailing feelings of insecurity and apprehension. Chinese investors discuss the political situation among each other and with head offices in China, which are concerned about negative reporting.</p>
<p>In the absence of positive signals from the federal government, larger investments by state-owned enterprises – in infrastructure building, for example – are unlikely to go ahead.</p>
<p>The report highlights the potential business implications of trying to separate business from politics in the relationship with China. Business co-operation between Australia and China is strategic rather than purely transactional. This means bilateral diplomatic relations have an important signalling function for long-term and large-scale investments.</p>
<p>Australia needs to build up supply chains and infrastructure to maintain its competitive advantage and to increase capacities in growing export industries such as agriculture and services. This in turn requires substantial investments.</p>
<p><img src="https://counter.theconversation.com/content/98144/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">So far, state governments and business are seen as supportive, but a more predictable diplomatic environment is indispensable for securing long-term strategic investment.</p>
<p><em><strong>Hans Hendrischke</strong>, Professor of Chinese Business and Management, University of Sydney</em></p>
<p><em><strong>Wei Li</strong>, Lecturer, Business School, University of Sydney</em></p>
<p><em>This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/chinese-investment-in-australia-falls-as-political-debate-hits-confidence-98144" target="_blank">original article</a>.</em></p>
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j.ballantyne1990-6AQqhLzZaK

Chinese investment in Australia falls as political debate hits confidence

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<p>The Reserve Bank Governor Philip Lowe delivered a speech at the Australia-China Relations Institute in Sydney last night.</p>
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<p><strong>What does it all mean?</strong></p>
<p>Governor Lowe noted that while the ascent of the Chinese economy has been positive for Australia, it is also not without its risks: “If a major economic shock were to originate from China over the coming years, its origin is most likely to be in the Chinese financial system...the experience is that the build-up of financial risks like those seen in China is almost always followed by a marked slowdown in GDP growth or a financial crisis. It is important to point out that these outcomes are not inevitable and that China is able to learn from the experience of other countries, including Australia... one of these concerns is that during the big run-up in debt, a lot of bad loans were made.”</p>
<p>The reform of the Chinese financial system has featured in Reserve Bank statements and indeed it is one of the key international risks for the Australian economy. But it is a case of ‘so far, so good’. The Chinese authorities are dealing with the challenges before they materialise – something many other economies haven’t done, waiting instead until a crisis has developed.</p>
<p>The Chinese economy is rebalancing. The authorities are grappling with an economic juggernaut. Efforts are being made to liberalise and deleverage the financial system. Growth has decelerated but is robust and stable. The current focus is on ‘quality’-type growth which targets unemployment of around 4.5 per cent and reduced pollution through supply-side reforms.</p>
<p><strong>Key points from the speech</strong></p>
<p>China’s economic rise has boosted Australia’s income and prosperity: In his speech entitled “Australia's Deepening Economic Relationship with China: Opportunities and Risks”, Dr Lowe is quick to stress the importance of Australia’s economic ties with its largest trading partner: “The deepening of our economic relationship with China has greatly benefited Australia. It has created new opportunities for us and significantly boosted our national income. It was also one of the factors that helped our economy through the global financial crisis.”</p>
<p>Deep economic ties and cultural respect can bind the two countries. The Governor states, “We will, of course, have differences from time to time, but we will surely be better placed to deal with these if we understand one another well. Building strong connections across business, finance, politics, academia and the community more generally is important to deepening this understanding.”</p>
<p>On trade and protectionism: “Together, we can also be a strong voice for the importance of an open international trading system and for effective regional cooperation.”</p>
<p>On the importance of China as Australia’s largest trading partner: “Our trade with China has expanded very rapidly over the past decade, to the point where China is now Australia's largest trading partner. China accounts for nearly one-third of our exports and around one-fifth of our imports”.</p>
<p>Growing export diversification: While Governor Lowe acknowledged the significant contribution that Australia’s bulk commodities, iron ore and coal (57 per cent combined total exports), make to national income, he stressed that it “... would be a mistake to view the trade relationship solely in these terms. Our exports to China are much more diverse than this.”</p>
<p>On Australia’s services sector bonanza: “Over the past decade, Australia's service exports to China have grown at an average annual rate of 15 per cent...the growth has been particularly strong in the areas of tourism and education.”</p>
<p>Record Chinese tourists flock ‘Down Under’: “Last year there were 1.4 million visitors from China to Australia, up from around 400,000 a decade ago...they now account for around 25 per cent of total visitor expenditure in</p>
<p>Australia, a considerably larger share than any other country.” said Dr Lowe.</p>
<p>The Governor also emphasises that education is Australia’s third largest export: “On the education front, there are currently around 200,000 Chinese students studying in Australia. Education exports to China now account for around one-third of Australia's total education exports.”</p>
<p>The ‘Dining Boom’ continues: “China has become the largest single export market for a range of Australia's manufactured food items. Exports of dairy products and alcoholic beverages have grown especially strongly, as have a range of other food and health-related products (of which vitamin sales are often remarked to be growing strongly).”</p>
<p>On China’s foreign investment: “Chinese investment accounts for only a small share of the total stock of outstanding foreign investment in Australia – just 3 per cent.”</p>
<p>Strengthening financial sector linkages: “The RBA sees first-hand the stronger financial relationship between our two countries. Since 2012, the RBA has had a currency swap agreement with the People's Bank of China, with the goal of giving market participants in Australia confidence that renminbi (RMB) will be available for trade settlement and other payment obligations. The RBA also now holds 5 per cent of our foreign currency reserves in RMB.”</p>
<p>Chinese population growth and growing cultural ties to Australia: “Over the past decade, the Chinese-born resident population in Australia has grown at an average rate of around 8 per cent per year. According to the latest Census, people born in mainland China account for 2 per cent of Australia's population (around 510,000 people).... Mandarin is now the second most commonly spoken language in Australian homes and Cantonese the fourth most common.”</p>
<p>On China’s economic rebalancing: “It is too early to tell whether the authorities will be successful in managing the transition from a growth model heavily dependent upon the accumulation of debt to one where credit is less central. It is a very significant task.”</p>
<p>China’s growing debt load poses significant risks: “If a major economic shock were to originate from China over the coming years, its origin is most likely to be in the Chinese financial system...the experience is that the build-up of financial risks like those seen in China is almost always followed by a marked slowdown in GDP growth or a financial crisis. It is important to point out that these outcomes are not inevitable and that China is able to learn from the experience of other countries, including Australia... one of these concerns is that during the big run-up in debt, a lot of bad loans were made.”</p>
<p>On shadow banks: “Another concern is the growth of the so-called ‘shadow banking’ system... non-bank financing now accounts for 45 per cent of total debt, up from 25 percent a decade ago....the smaller banks have played an important role in the growth of shadow financing. This is evident in the rapid growth of their claims on non-bank financial institutions...the complex web that has developed in China is characterised by opaque risk transfers, implicit guarantees and complex connections.”</p>
<p>China is attempting to deleverage: “At a recent policy meeting convened by President Xi Jinping, the leadership called for a gradual reduction in the debt-to-GDP ratio... these various measures provide a strong signal that the Chinese authorities are serious about addressing the vulnerabilities. Consistent with this, the lower economic growth target for 2018 of 6.5 per cent suggests some tolerance for a gradual slowing in growth.”</p>
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The Reserve Bank are watching China: CommSec

The risks and opportunities of our deepening economic ties with China: RBA's Philip Lowe

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<p>Behind mega urban projects often stand strong political wills. Xiong’an is called China’s number-one urban project, and it is <a href="https://www.brookings.edu/opinions/a-brave-new-world-xis-xiongan/" target="_blank">orchestrated by President Xi Jinping.</a></p>
<p>China is midway through the <a href="https://www.economist.com/news/china/21640396-how-fix-chinese-cities-great-sprawl-china" target="_blank">largest urbanisation process in human history</a>. New cities have mushroomed in recent decades. The most prominent are <a href="https://www.britannica.com/place/Shenzhen" target="_blank">Shenzhen</a> (above) and <a href="https://www.britannica.com/place/Shanghai" target="_blank">Pudong Shanghai</a>, both of which are now major global financial and business centres.</p>
<p>Shenzhen and Pudong Shanghai were credited to Deng Xiaoping. China’s then leader <a href="http://en.people.cn/n3/2017/0403/c90000-9198362" target="_blank">pushed forward the construction of these cities from scratch</a>, to drive his agenda of national reform and opening up to the world.</p>
<p>After his first five-year term as president, it is clear that Xi Jinping’s political ambition is to equal or even surpass the records of Mao Zedong and Deng Xiaoping. Mao and Deng each ruled China for nearly three decades, in person and by selecting their successors.</p>
<p>Xi has proclaimed a “new era”, enthroned his “thoughts”, appointed his allies, and outlined national modernisation goals to 2035 and even as far ahead as 2050.</p>
<p>He also amended the Chinese Constitution to <a href="https://theconversation.com/how-xi-jinpings-lifetime-presidency-could-change-china-for-better-or-worse-92472" target="_blank">remove the two-term restriction</a> on the presidency. This was the final barrier to pursuing power after 2023, when he was due to step down.</p>
<p>What else? Xi needs a new city, with his name imprinted!</p>
<h2>Putting a new city on the map</h2>
<p>There are three mega-city regions in eastern China. Shenzhen is in the <a href="https://www.theguardian.com/cities/2016/may/10/china-pearl-river-delta-then-and-now-photographs" target="_blank">Pearl River Delta</a>, Pudong Shanghai is in the <a href="http://www.scmp.com/comment/insight-opinion/article/1897065/how-economic-dynamism-yangtze-river-delta-flowing-inland" target="_blank">Yangtze River Delta</a>, so Xi’s new city must be in the Beijing-Tianjin-Hebei region.</p>
<p><a href="https://images.theconversation.com/files/217207/original/file-20180502-153895-1hsieuj.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/217207/original/file-20180502-153895-1hsieuj.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=237&amp;fit=clip" alt=""></a></p>
<p><span class="caption">Xi Jinping’s new mega-city, Xiong’an (the area in red) will be located midway between Beijing, Tianjing and Shijiazhuang (click to enlarge).</span> <span class="attribution"><a class="source" href="https://www.google.com.au/maps/place/Xiongxian,+Baoding,+Hebei,+China/@39.0206138,115.7617431,9.06z/data=!4m5!3m4!1s0x35efa231eb92fcb5:0xb5dfe3f1103da7ee!8m2!3d38.99455!4d116.10865" target="_blank">Google Maps</a></span></p>
<p>Xi selected Xiong’an, an underdeveloped area located centrally between Beijing, Tianjing and Shijiazhuang, the capital city of Hebei Province. Xiong’an has a vast water area, a <a href="https://en.wikipedia.org/wiki/Water_resources_of_China" target="_blank">rare natural endowment in northern China</a>.</p>
<p>Xi <a href="http://www.chinadaily.com.cn/a/201804/02/WS5ac122faa3105cdcf6515949" target="_blank">stressed the principles</a> of “world vision, international standards, Chinese characteristics and high goals” in planning and building Xiong’an. A “<a href="https://www.sciencedirect.com/science/article/pii/S0016718517303196" target="_blank">Millennium Plan</a>” and a “national strategy”, Xiong’an should be different from, or more ambitious than, its predecessor new cities. Shenzhen was created in the 1980s; Pudong Shanghai in the 1990s; Xiong’an should represent a city-making approach with Chinese characteristics in the 21st century.</p>
<h2>What’s the plan?</h2>
<p>On April 21, 2018, China’s official Xinhua News Agency <a href="http://english.xiongan.gov.cn/2018-04/21/c_129855751.htm" target="_blank">released the planning guidelines</a> for Xiong’an. This followed their endorsement by the Central Committee of the Chinese Community Party and the State Council.</p>
<p>These planning documents will guide the development of Xiong’an until 2035 and envision its long-term progress until the middle of this century. This aligns with Xi’s timelines for national modernisation goals.</p>
<p><iframe src="https://www.youtube.com/embed/l1hXrz1F3Qg?wmode=transparent&amp;start=0" frameborder="0" width="440" height="260"></iframe></p>
<p><span class="caption">Xiong'an is presented as central to President Xi Jinping’s vision of national development for decades to come.</span></p>
<p>Key elements of the guidelines are:</p>
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<p><strong>visions:</strong> a green, ecological and liveable new area; an innovation-driven development; a demonstration area of coordinated development; and a pioneer in China’s modernisation strategy</p>
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<p><strong>targets:</strong> 2035 – basic construction of a high-level socialist modern city that is green, low-carbon, smart, competitive, influential and harmonious with humans and nature; mid-21st century – comprehensive construction complete, a key pillar of the world-class Beijing-Tianjin-Hebei city region</p>
</li>
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<p><strong>spatial specifications:</strong> green space 70%, development land 30% (a total area of around 530km²), arable land 18% (including permanent farming land 10%), population density 10,000 people/km²</p>
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<p><strong>non-capital city functions transferred from Beijing:</strong> universities and research institutions, hospitals and health, finance, advanced services and high-tech industries</p>
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<p><strong>priority industry sectors:</strong> new information technology, life and biological sciences, new materials, advanced modern services, and green and ecological agriculture</p>
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<p><strong>transport connectivity:</strong> high-speed rail network – 20 minutes to the new Beijing airport, 30 minutes to Beijing and Tianjing, and 60 minutes to Shijiazhuang; expressway network – 60 minutes to Beijing and Tianjing, and 90 minutes to Shijiazhuang; 90% green transport share and 80% public transit share in vehicle transport in the initial development area; exploring intelligent driving and logistics systems.</p>
</li>
</ul>
<h2>Can it be done?</h2>
<p>The targets suggest a new city with a population of 5 million erected by 2035 and completed by around 2050. Be mindful: Chinese city plans are normally “conservative” in setting targets.</p>
<p>Is the plan achievable? State ownership of land and a centralised planning system will ensure it happens at a speed and scale hardly paralleled elsewhere. Think of Shenzhen and Pudong Shanghai.</p>
<p><img src="https://counter.theconversation.com/content/95442/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">However, the most important factor is whether President Xi’s desired political pathway remains on track.</p>
<p><span><a href="https://theconversation.com/profiles/richard-hu-7319">Richard Hu</a>, Professor, Faculty of Arts and Design, <em><a href="http://theconversation.com/institutions/university-of-canberra-865" target="_blank">University of Canberra</a></em></span></p>
<p>This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/xiongan-xi-jinpings-new-city-making-machine-turned-on-95442" target="_blank">original article</a>.</p>
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China president Xi Jinping is conducting the largest urbanisation in human history

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<div class="column">China consumer prices rose by 1.8 per cent in the year to April (forecast 1.9 per cent), down from 2.1 per cent in the year to March.</div>
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<br>Food prices fell 1.9 per cent in April to stand 0.7 per cent higher than a year ago. Non-food prices rose 0.2 per cent to stand 2.1 per cent higher than a year ago.<br><p style="display: inline !important;"> </p>
<p style="display: inline !important;">China business inflation - producer prices rose by 3.4 per cent in the year to April (forecast 3.5 per cent), up from 3.1 per cent in the year to March. Raw material costs are up 5.7 per cent on the year.</p>
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<p style="display: inline !important;"> </p>
The Chinese data have implications for the currency markets and therefore exporters and importers.</div>
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<div class="column"><strong>What does it all mean?</strong></div>
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<br>In China, non-food inflation has been comfortably between 2.0-2.5 per cent over the past year. In contrast Australian inflation is still struggling to get into the Reserve Bank’s 2-3 per cent target band. The bottom line is that the Chinese economy is healthy with firm activity levels and sustainable inflation. While costs for businesses are growing at a faster pace above 3 per cent, it will be remain just a watching brief for policymakers.</div>
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<div class="column">It is in Australia’s interests – especially in terms of the budget position – to have a healthy Chinese economy. At present the two largest economies – the US and China – are driving global economic growth. At the same time, a lower Australian dollar and rising energy prices are positive influences on resource sector incomes, and thus exports.</div>
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<p style="display: inline !important;"><strong>What do the figures show?</strong></p>
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<div class="column">China inflation:</div>
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<div class="column">Consumer prices rose by 1.8 per cent in the year to April (forecast 1.9 per cent), down from 2.1 per cent in the year to March.</div>
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<br>Consumer prices fell by 0.2 per cent in April after falling by 1.1 per cent in March. Food prices fell 1.9 per cent in April to stand 0.7 per cent higher than a year ago. Non-food prices rose 0.2 per cent to stand 2.1 per cent higher than a year ago.</div>
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<div class="column">Click here <a href="https://www.propertyobserver.com.au/images/2018/5/10/prices.jpg" target="_blank">to enlarge.</a>
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<div class="column">Over the year, food and tobacco prices rose by 1.1 per cent; clothing rose 1.1 per cent; rent, fuel &amp; utilities rose by 2.2 per cent; household goods and appliances rose 1.5 per cent; transport and communications rose 1.1 per cent; education &amp; entertainment rose 2.0 per cent; healthcare rose 5.2 per cent; and other goods and services were up 0.9 per cent.</div>
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<div class="column">Producer prices rose by 3.4 per cent in the year to April (forecast 3.5 per cent), up from 3.1 per cent in the year to March. It was the first lift in the annual rate in seven months.</div>
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<div class="column">Over the year, the prices of raw materials were up by 5.7 per cent with the cost of processing up 3.9 per cent. The means of production were up 4.5 per cent with extraction costs up 6.1 per cent.<br><p style="display: inline !important;"> </p>
<p style="display: inline !important;">Over the year prices of consumer goods rose just 0.1 per cent with consumer durables down 0.6 per cent over the year, “daily use” goods up 0.9 per cent and clothing up just 0.2 per cent.</p>
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<div class="column"><strong>What is the importance of the economic data?</strong></div>
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<br>China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 19th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10th of each month. China is Australia’s largest trading partner and changes in the Chinese economy have major implications for the Aussie economy.</div>
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<div class="column"><strong>What are the implications for interest rates and investors?</strong></div>
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<div class="column">Chinese consumer inflation is still well below the broad target for 2018 of “around 3 per cent”. Consumer goods inflation is low with main strength in the services sector, especially healthcare.</div>
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<div class="column">Chinese producer prices are still growing in excess of consumer prices. So policymakers will remain alert, but at this stage there won’t be undue concern.</div>
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<div class="column">CommSec doesn’t expect a change in Australian interest rates in the near term. <br><span style="font-size: 12.16px;"><br></span>
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<div class="column"><span style="font-size: 12.16px;"><em>Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.</em><span> </span></span></div>
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cjames-5S2v74qSNK

Chinese inflation data confirms healthy economy: CommSec

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<p>The recent rush of Chinese-backed development in Australia has created inroads for some of the country's architecture firms to also export their design expertise.</p>
<p>DBI Design team has just won the tender to the masterplan of a $3 billion development for a new financial district in Shantou, 300 kilometres north-east of Hong Kong - billed as a new 'micro city'.</p>
<p>The project will include 10 commercial buildings, 16 apartment and residential towers, two hotels , a shopping centre, cultural precinct and marina.</p>
<p>The new micro city will house more than 7,000 permanent residents, accommodate more than 2,000 tourists and support a working population of more than 22,000.</p>
<p>The new community, which is being developed on the 68 hectare site of an abandoned theme park, will be known as the Shantou Overseas Financial Centre.</p>
<p>DBI Design director Raith Anderson says Shantou Overseas Financial Centre is the company's next headline international development, following on from the $1.5 billion Etihad Towers in Abu Dhabi, which was completed in 2012 and has won accolades in the 2011 World Travel Awards and 2012 Emporis World Skyscraper Awards.</p>
<p>It will take about eight years to develop.</p>
<p>"This clearly shows that it is a two way street in terms of Australian-Chinese property development.</p>
<p>"While we have seen a lot of Chinese-led projects in Australia recently, the Chinese are very receptive to high quality design proposals from Australian firms," he said adding China was increasingly moving away from design conformity and embracing creativity.</p>
<p>"It's all about big picture thinking - creating a whole new space where people can live, work and play. While this project is branded a financial centre and the emphasis is on the two signature 380 metre high commercial and hotel towers, the vision is to attract permanent residents and tourists too - it will be a new destination in its own right."</p>
<p>The Shantou Overseas Financial Centre is being developed by  JinFeng Group, a large Guangdong-based private enterprise headquartered in central Hong Kong.</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/21/Shantou_0009.jpg" alt=""></p>
<p>With a registered capital of RMB200 million and total assets worth over RMB10 billion, the Group’s operations have grown from its core real estate business into diversified areas including construction, tourism, mining and financial investment. </p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/21/Shantou_0012.jpg" alt=""></p>
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Australia's DBI Design overseeing new $3 billion micro city in China

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<p>GUEST OBSERVER</p>
<p>The real estate sector has been a key driver of China’s economic growth in recent years, helping to support the economy during the transition away from growth led by investment in heavy industry towards domestic consumption.</p>
<p>However, this growth has also built a sizeable debt burden which will have to be carefully managed in coming years to avoid a major downturn. </p>
<p>This is the first of two parts looking into the real estate sector. This part provides a high level view of the importance of the sector and recent trends, while part two will look at the risks related to the sector going forward.</p>
<p><strong>PROPERTY SECTOR A CORE COMPONENT OF CHINA’S ECONOMY</strong></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/1/CORELOGIC%201.jpg" alt=""></p>
<p>Private ownership of real estate has a short history in China. Prior to the period of opening up that commenced in 1978, all property was state-owned. Two decades of gradual reforms saw the introduction of ‘commodity houses’ in 1998 – private properties that could be bought and sold at market prices. Chinese residents embraced home ownership – with surveys conducted by Peking University showing that around 90% of households own their home.</p>
<p>The property sector is a critical part of China’s economy, and has been a major driver of growth over the past decade. In 2017, the broad sector (accounting for construction and real estate services) comprised 13.2% of China’s economy – compared with 10.8% a decade earlier, highlighting above average growth over this period. The IMF estimates that when combined with upstream and downstream demand (including cement and steel, along with furniture, electronics and automobiles), real estate drives around a quarter of the Chinese economy.</p>
<p>Similarly, investment in real estate (as a share of GDP) rose sharply from the start of the century – peaking at almost 15% of GDP in 2014, before easing back to 13.3% in 2017. The residential sector accounts for over two-thirds of this total. The trend over this period was supported by the mass migration of Chinese residents from rural areas to cities, as well as a substantial improvement in the quality of housing for existing urban residents.</p>
<p><strong>Property a major part of the economy </strong></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/1/CORELOGIC%202.jpg" alt=""></p>
<p>Real estate’s importance to the financial sector has also increased in recent years. Outstanding loans to real estate have rapidly increased over the past decade – from around RMB 4.8 trillion to over RMB 32 trillion in Q4 2017. This increase has outpaced lending growth to other sectors as well as the broader economy– with real estate lending (as a percentage of GDP) increasing from 18% a decade ago to around 39% at the end of last year. Although this share is not particularly high when compared with advanced economies – particularly Australia (where it is around 90% of GDP) and the United States – its rapid growth poses some concern.</p>
<p>The key contributor to the increase in real estate lending has been residential mortgages – with the mortgage share of total real estate lending rising to 74% in December 2017, up from 63% in December 2007. In addition, the property sector has lured funds from the shadow banking sector (although data on this sector is patchy at best). In Q3 2017, around 10% of funds from the trust sector (one component of shadow banking) were invested in real estate. </p>
<p><strong>Property loans have grown rapidly </strong></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/1/CORELOGIC%203.jpg" alt=""></p>
<p>Finally, the sector has been extremely important to government balance sheets – with land sales a major source of revenue for the often highly indebted local governments. In 2016, land sales accounted for almost 26% of the total – although this share varies widely across the country. Governments also benefit from tax revenue from the real estate sector – although at present there are no residential property taxes. The sector is also been a major employer – around 27 million people were employed in construction in 2016, with a further 4 million in real estate management, which together accounts for almost 18% of urban employment (and with it income tax revenue). </p>
<p><strong>Land sales still a major source of funding </strong></p>
<p>This implies that there are various bodies – both state and private – that benefit from continued growth in construction and property development, despite growing concerns around oversupply once again. This incentive to continue to expand increases risks around China’s economy. </p>
<p><strong>RECENT TRENDS IN PROPERTY </strong></p>
<p>China’s previous residential property cycle peaked in April 2014 – following a period of domestic and international concern around potential price bubbles and overbuilding (particularly in so-called ghost cities). Aggregate prices for 70 major cities fell over the next twelve months before the recovery commenced (led by the largest Tier 1 cities – Beijing, Shanghai, Shenzhen and Guangzhou).</p>
<p>During this period, there was a substantial slowdown in investment in the real estate sector – with the rate of growth down from around 15% yoy (on a three month moving average basis) to -0.6% yoy (3mma) by November 2015. This resulted in a drop in construction activity, with residential starts (measured in square metres of floor space) falling considerably between February 2014 and January 2016. These weaker conditions flowed through into the next link in the chain – local government revenues from land sales fell 24% in 2015 on weaker demand from developers. </p>
<p><strong>PROPERTY PRICES BY TIER - </strong><strong style="font-size: 12.16px;">Vast disparities between China’s cities </strong></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/1/CORELOGIC%204.jpg" alt=""></p>
<p>However, investment in real estate recovered in 2016 – as easing property purchase restrictions allied to a credit boom, fiscal stimulus and poor performance in other asset classes supported a fresh surge in property demand and construction activity. Much of the attention was focussed on the extraordinary price increases in tier 1 cities – by September 2016, prices in these locations were 40% above their April 2014 peak – however these cities accounted for just 8% of real estate investment in 2016 (IMF). The majority of investment (59%) occurred in smaller tier 3 and 4 cities (where prices in December 2017 were only 4.0% above the previous peak), where concerns around oversupply have been higher.</p>
<p>This growth provided a major boost to China’s economy in 2016 – at a time where fears of a hard landing were elevated. In real terms, real estate and construction grew by 8.6% and 7.2% respectively in 2016, well above the rest of the economy. </p>
<p>Growing fears around overheating property markets have seen a tightening in property policies since this time– including higher down payments, restrictions on finance and tighter eligibility for purchases – however these policies have varied across the country. Prices stabilised in tier 1 cities and growth slowed substantially in tier 2 ones. As a result, the strong growth in construction starts and property sales in the first half of 2017 slowed considerably in the second half.</p>
<p><strong>CONCLUSIONS </strong></p>
<p>We anticipate the slowing trends generally exhibited across the property sector in late 2017 will extend into this year. Slowing sales and softer price trends should flow through into weaker construction activity – which would have downstream effects for steel and cement demand (along with Australian iron ore) and local government revenues (with land sales likely to fall as well). </p>
<p><em><strong>Gerard Burg</strong> is senior economist - Asia Group Economics at National Australia Bank.</em></p>
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China's property sector slowing amid growing fears of overheated market: NAB's Gerard Burg

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<p>This year the Chinese Communist Party will tackle some of it’s biggest economic hurdles.</p>
<p>In 2017, we saw the consolidation of China’s power and influence globally, and of Communist Party leader Xi Jinping’s power nationally. This year, the party will try to use this to tackle some of its biggest economic hurdles such as financial risk, environmental pollution and maintaining social cohesion.</p>
<p>A first and overriding priority will be managing and preventing major financial risks within the Chinese economy. China will continue to clean up and tighten controls over its financial sector.</p>
<p>Beijing has already banned risk-laden <a href="https://www.forbes.com/sites/kenrapoza/2017/11/02/cryptocurrency-exchanges-officially-dead-in-china/#79cae9a2a839" target="_blank">Bitcoin from its financial system</a>, and <a href="http://www.xinhuanet.com/english/2017-12/25/c_136851284.htm" target="_blank">the government says</a> it will maintain a “proactive fiscal policy and prudent monetary policy” for 2018.</p>
<p>This is in line with moves earlier in 2017 to curb credit growth and consolidate the country’s <a href="https://www.caixinglobal.com/2017-11-27/financial-regulators-seek-to-tame-chinas-15-trillion-wild-west-101176493" target="_blank">100 trillion yuan (US$15 trillion) financial services asset-management industry</a> under a single regulatory umbrella.</p>
<p>Regulators have also issued <a href="http://www.scmp.com/news/china/economy/article/2124964/china-issues-new-code-conduct-tame-overseas-investors" target="_blank">a 36-point code of conduct</a> for the country’s private enterprises to follow when investing overseas. This is part of a move to clip the wings of China’s most aggressive global deal makers, firms like HNA Group and Fosun International. These businesses responded enthusiastically to the government’s “going out” policy to link China to the rest of the global economy, launched at the beginning of the century.</p>
<p>On the one hand, China has banned investments in gambling and “sensitive” industries and restricted investments in property, hotel, film and sports. But projects linked to China’s ambitious Belt and Road initiative <a href="https://www.bloomberg.com/news/articles/2017-08-18/china-further-limits-overseas-investment-in-push-to-reduce-risk" target="_blank">are actively encouraged</a>. So 2018 should see a continuation of China’s expanding economic influence globally through infrastructure and other major projects.</p>
<p><a href="https://images.theconversation.com/files/201458/original/file-20180110-48505-14mg7t0.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/201458/original/file-20180110-48505-14mg7t0.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a></p>
<p><span class="caption">Beijing’s agenda is clear and the message from the centre is tightly controlled.</span> <span class="attribution"><span class="source">How Hwee Young/AAP</span></span></p>
<h2>Tackling pollution, of all kinds</h2>
<p>In line with the party’s focus on stability and risk minimisation is a clear determination to move away from high-speed growth to high-quality growth. “Quality” here means an economy that is cleaner and more user friendly.</p>
<p>The government is trying to reduce pollution. Measures to close down polluting factories and make local officials more accountable for environmental damage <a href="https://cen.acs.org/articles/95/i26/China-looks-restore-blue-skies" target="_blank">are starting to make a difference</a>.</p>
<p>A major component of the shift to a cleaner economy is China’s determination to free itself <a href="https://www.reuters.com/article/us-china-economy-trade-coal/china-oct-coal-imports-fall-to-21-28-million-tonnes-on-air-pollution-campaign-idUSKBN1D80FG" target="_blank">from any reliance upon carbon imports</a>. This has potentially major implications for the Australian economy, which has done so well over the past few decades largely because of its commodity exports to China.</p>
<p>China is also no longer willing to accept imports of Australian waste, leaving Australia with the question of how else to deal with <a href="https://www.propertyobserver.com.au/http://www.abc.net.au/news/2017-12-10/china-ban-on-foreign-rubbish-leaves-recycling-industry-in-a-mess/9243184" target="_blank">its accumulating stockpiles</a>.</p>
<p><span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">Social stability for economic and political stability</span></p>
<p>In an unusual move during last year’s annual end-of-year economic convention, the government <a href="http://www.scmp.com/news/china/economy/article/2125135/big-picture-chinas-most-important-economic-meeting-year" target="_blank">detailed concerns from the wider public</a> on issues such as online scams, sex discrimination in the workplace and a lack of kindergarten services in certain regions. This reflects the party’s concern with social cohesion.</p>
<p>Maintaining a harmonious society has long been a concern of China’s leaders. In 2018, the anti-poverty campaign - one of Xi Jinping’s pet projects - will accelerate, with millions of rural poor being relocated <a href="https://www.theguardian.com/world/2018/jan/07/china-move-millions-people-homes-anti-poverty-drive" target="_blank">to new housing with water and power</a>. This will not only boost GDP and economic growth figures, it’s also aimed at promoting support for the party and its leaders.</p>
<p>Chinese leadership’s emphasis on social harmony extends to supporting the party in its policy endeavours. A series of recent measures have been aimed at strengthening party organisations in <a href="https://www.reuters.com/article/us-china-ngos/china-to-strengthen-communist-partys-role-in-non-govt-bodies-idUSKCN10X07C" target="_blank">business and civil society organisations</a>.</p>
<p>In line with existing provisions <a href="http://www.fdi.gov.cn/1800000121_39_4814_0_7" target="_blank">in China’s Company Law</a>, these measures seek to ensure that all organisations in China (local and foreign, commercial and non-profit) make room within the organisation for the operations of a Communist Party cell. This allows the party to monitor and influence the operations of any organisation.</p>
<p>The rolling out of a social credit system is also aimed at monitoring and influencing the behaviour of <a href="http://www.wired.co.uk/article/chinese-government-social-credit-score-privacy-invasion" target="_blank">both organisations and individuals</a>. It operates by awarding social credit points for good social behaviour, whether it be corporate philanthropy or an individual picking up rubbish on the kerbside. It also deducts points for bad behaviour, such as traffic law violations, failing to pay bills on time or domestic violence. There are even <a href="http://www.scmp.com/news/china/economy/article/2095876/new-credit-rating-system-gives-china-big-carrot-even-bigger-stick" target="_blank">“blacklists”</a> for the worst offenders.</p>
<p>Beijing’s agenda is clear and the message from the centre is tightly controlled. But the messiness and the unknowns will lie in its local implementation.</p>
<p>China has always struggled, and always will struggle, with the question of how to balance direction from a central government with local implementation for local circumstances.</p>
<p>For example, a recent decree requiring all local areas to move away from coal fired heating, towards natural gas, hit a snag when thousands of houses and schools were <a href="http://www.scmp.com/news/china/policies-politics/article/2124800/why-chinas-winter-fuel-crisis-cold-hard-lesson-law" target="_blank">left without heating in freezing conditions</a> in northern China. It forced authorities to back-track on implementing the policy.</p>
<p>The key for the government will be to strike a balance between reform and preserving stability. Aggressive reforms will be duly countered by other policies if they are seen as posing risks to economic stability.</p>
<p><img src="https://counter.theconversation.com/content/89911/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">If successful, China’s reforms will allow its economy to take the lead in adapting to a dynamic world. But the sheer size of its ambitions (both global and local) also contains the risk that failures, if they occur, could have devastating impacts.</p>
<p><span><a href="https://theconversation.com/profiles/alice-de-jonge-118840" target="_blank">Alice de Jonge</a>, Senior Lecturer, International Law; Asian Business Law, <em><a href="http://theconversation.com/institutions/monash-university-1065" target="_blank">Monash University</a></em></span></p>
<p>This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/what-we-can-expect-from-chinas-economy-in-2018-89911" target="_blank">original article</a>.</p>
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What we can expect from China's economy in 2018

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<div>
<p>Allianz plans to boost its real estate investment in China, announcing the launch of a $US750 million ($992 million) fund that targets malls in major cities.</p>
<p>The German insurer and asset manager expects outlet shopping in China will continue to grow despite threats from online stores and a slowing economy.</p>
<p>Allianz Real Estate, Allianz's $63.5 billion property investment arm, launched the China-focused fund in partnership with investor TH Real Estate earlier this month.</p>
<p>Allianz will be the anchor investor owning 30 percent of the fund.</p>
<p>"China will become one of the top markets for us in Asia," Rushabh Desai, Asia-Pacific CEO of Allianz Real Estate, told Reuters.</p>
</div>
<div>He expects to grow Allianz's real estate portfolio in China to more than €1 billion ($1.18 billion) over the next 12 months, from about €760 million by the end of this year.</div>
<div> </div>
<div>Last year, the number was €100-150 million.</div>
<div>
<p>"Even if there is a slowdown, China still has 5-6 per cent annual GDP growth, right? In my mind, 5-6 per cent growth is still one of the best growth in the world," Desai said.</p>
<p>He also sees limited threat from China's booming online shopping, saying people don't buy Prada bags via the internet.</p>
</div>
<div>"People are not buying branded products online; people are buying day-to-day stuff online from Alibaba."</div>
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