CHINESE SNAP UP AUSTRALIAN HOTELS
Written on the 14 October 2016
CHINESE investors accounted for 42% of the $1.7 billion in hotel sales in Australia year-to-date according to new research from CBRE.
CBRE Hotels Executive Director Robert McIntosh says the Australian hotel market is being increasingly targeted by Asian capital with Chinese investors leading the charge.
"Recent volatility in global equity markets, particularly in China, and the onset of low-yielding bond markets has served to increase the appeal of property as an investment class, with Australia perceived to be a relatively low risk, strong, stable and transparent market in which to invest," says McIntosh.
Significant purchases this year include that of the proposed The Ribbon project in Darling Harbour by Chinese-backed development and investment group Greaton and the sale of the Park Regis in Sydney to a Chinese private capital group.
Other transactions include South Molle Island in the Whitsundays (pictured), which was purchased for $25 million by Shanghai-based China Capital Investment Group (CCIG), 18 months after the group acquired the adjacent Daydream Island Resort and Spa for $30 million.
CBRE Hotels National Director Wayne Bunz notes that the ability to acquire freehold properties is particularly attractive, given the leasehold nature of property ownership in China.
"Many Chinese investors are seeking generational buying opportunities, acquiring assets that they can hand down to their children, not just for one generation but for several generations to come," says Bunz.
"They are also showing strong interest in Australian leisure assets in order to capitalise on the current strength in the tourism sector, which is benefitting from record inbound and domestic tourism."
The increase in Chinese investment (which totals $715 million year to date) comes amid what has been a quieter period in the Australia hotel sector after a record year in 2016.
CBRE's data highlights 28 sales totalling $1.7 billion in the first three quarters of the year compared to 41 sales totaling $2.3 billion in same period last year.
However, the average size of transactions has been growing from $36 million in 2014 to $55 million in 2015, with the average transaction size this year being even higher at $60 million.
The average price per room has not increased, but the size of the properties has; from an average size of 102 rooms in 2014 to 142 rooms in 2015 and 165 rooms in 2016.
Mr Bunz says the data also highlights that the location of where capital was being invested was changing.
This change has not been on state by state basis, with NSW attracting between 49% and 56% of investment each year followed by Victoria at 19% to 27% and Queensland at 16% to 17%.
"Rather, the shift involves the growing volume of capital that is being invested in regional locations," says Bunz, noting that significant sales had occurred this year in markets such as Cairns and the Central Coast of NSW.
"In 2014 and 2015, transactions in regional areas comprised around 20% of total sales by value. Year to date, that figure has grown to 24% and when you look at the data by number of sales the change is even more dramatic, up from 40% to 60%."