Hong Kong-listed property giant R&F Properties has agreed to buy a Brisbane riverfront site for more than $80 million, greater than four times what DEXUS Property Group sold it for 18 months ago, in another sign of Chinese appetite for prime redevelopment sites.
If the deal progresses, it will mark more than $370 million worth of residential development sites sold in Brisbane in the last 12 months over just seven transactions with Asian-backed buyers.
However, it could also sound the warning of an overheated market and one where some developers might get caught out.
R&F Properties set the Brisbane market alight in August last year when it agreed to pay $46 million for a former TAFE college in south Brisbane in September.
The vendor of that site, Metro Property Group, paid $22 million for the property when it purchased it from the state government less than 12 months earlier.
R&F’s $80 million purchase is believed to be conditional on the vendor, Pointcorp, receiving development approval. PointCorp’s Chris Vitale and JLL’s Seb Turnbull, who brokered the deal, were unavailable for comment. PointCorp purchased the 1.68-hectare site at 25 Donkin St, West End from DEXUS early last year for $16.7 million.
Brisbane is now experiencing the same heat on development site assets as Sydney and Melbourne.
Last month, Singaporean group Wee Hur Holdings joined the rush, nabbing a 1.7 hectare site at Buranda in Brisbane’s east for $53.1 million from local developer Anthony John Group. Wee Hur executive chairman Goh Yeow Lian said such sites would continue to hold their value in the market.
“As much as it is a new environment for us, we are optimistic of this project in view of the good location,” he said.
CBRE’s Mike Walsh, Peter Court and Flint Davidson transacted the Buranda deal and expect more Asia-based capital to flow in, especially with a falling Australian dollar.
“In the past two weeks alone we have had three new entrants meet in our office with a combined mandate value exceeding $500 million with a sole focus on Brisbane,” Mr Walsh said.
Mr Walsh said the Asia-based buyers had lower return hurdles, as well as stronger ability to sell the majority of their apartments back to their homeland and hold unsold stock on their balance sheet.
The Reserve Bank of Australia has harboured some concerns over the wave of Asia-based capital especially in relation to fuelling higher prices.
“Melbourne and Sydney has seen an explosion of middle-class Chinese mum and dad investors purchase the apartments with the same vigour as the developers and we are slowly witnessing signs of this in Brisbane,” Mr Walsh said.
“Furthermore the pricing disparity between Brisbane site values and our interstate counterparts is as wide as its ever been and this continues to pique the interest of these major groups.”
However, CBRE’s Peter Court said there was some concern about how rapid the price growth has been.
“The risk with this offshore capital seeking scale and density is that the local market misjudges the timing and holds out for the peak and that could mean they end up with a situation like 2007,” Mr Court said.
With the Australian dollar having dropped more than 25 per cent in the last 18 months, the currency attraction also looks to be an enticing factor for further investment from Asia.