Wednesday, November 12, 2014

The great Australian land grab

At BusinessSpectator: The great Australian land grab
For Asian developers, Australia has become a proxy for growth to offset a downturn in their home markets -- and they are hugely inflating prices in Australia as they compete for land.
The foreign developers are routinely paying at least 25 per cent more than Australian developers are prepared to pay for sites in sought-after areas across Sydney and Melbourne.
As a result, local developers are effectively being priced out of the market.
“I am finding it difficult to get good sites,” says a Sydney developer, who requests anonymity.
“We are presented with a real conundrum, because we have to keep a land bank for future projects -- and Asian, particularly Chinese, developers are prepared to pay top dollar for sites without understanding the complexities of the development business in Australia.”
Apparently some local developers now even see selling down their land banks as a low risk way to realise a component of the development profits without having to develop the site themselves:
Holm recently hosted a lunch for 30 or so regular clients (old-time Greek and Italian developers) in Victoria, and says none of them are buying sites at the moment.
“Some are selling part of their land bank. They simply think of a number, double it and put on a development profit,” he says.
Mr Sanfilippo concurs. “Some local developers are selling their land for nearly as much profit as they could expect were they to develop the sites themselves.
“They may not make 100 per cent, perhaps 75 to 80 per cent of the development profit -- but there’s no risk,” he says.
Asian developer and investor influx also has increasing relevance for Cairns. The report also notes the cheaper financing currently sourced from Asia, which is effectively a kind of carry trade, as a factor consistent with my previous posts on Aspial: Billionaires getting cheaper! A quick look at Aspial Corporation

Potential for risks and unintended consequences in this scenario are not low.

Note: Previous post also on Aspial and apparent misvaluation on the Spence St land which I wasn't subsequently able to confirm from the Valuer-General: Land valuation weirdnesses revisited.

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