Spice Aplenty In Chinese Property
Sydney Morning Herald
Saturday June 14, 2008
FOUR years ago, China was Australia's third-largest trading partner behind Japan and the United States. China passed the US three years ago and then passed Japan last July to take the top spot. In just over six years, total trade with China has increased threefold.
China accounts for 15 per cent of Australia's two-way trade, up from about 5.7 per cent at the start of the decade. It accounts for 15.4 per cent of Australian imports and takes 14.5 per cent of Australia's exports. The global property team at UBS says in its latest report that the increasing economic importance of China is the biggest change to the Australian economy in about 40 years, and that with industrialisation in its infancy, China's importance to the Australian economy will grow substantially. "The key difference between Japan's industrialisation from 1950-1980 and China's is the relative size of the two countries' populations," the report says. In 1970 Japan had a population of about 100 million; China's population is 1.3 billion. Increasing Chinese wealth and consequent demand for manufactured goods and energy would place significant demands on the world's resources. "The rise of China has already meant significant changes for Australia. China's need for resources has boosted demand and prices for commodities. The demands on the mining sector have shown up in the need for extra labour, transport services and infrastructure." As a consequence, the Chinese property market offered the most potential of any country in Asia, said the executive managing director of CB Richard Ellis Investors, Mark Karlan. Speaking this week about opportunities in Asian real estate, Mr Karlan said while Japan and India were attracting significant investor interest, China was the market with the most compelling prospects. He said China would pass Japan to become the world's second-largest economy within the next decade. Its property market was robust, with an under-supply of high-quality space, improved infrastructure "and only limited overbuilding in certain regions". The Chinese market was underpinned by a growing middle-class population which already numbered 300 million. Mr Karlan said eight of the world's top 10 shopping centres were in China, including the International Trade City in Yiwu, which has 30,000 stores and is close to nine times the size of Australia's Knox City Shopping Centre in Victoria. A second phase of International Trade City is being developed to capitalise on the centre's strong performance. CB Richard Ellis Investors is a CBRE-owned investment management business with more than $US42 billion ($45 billion) in property funds under management. Its Strategic Partners II fund is projecting gross internal rates of returns of between 22 and 29 per cent on its recent investments, which included a 25 per cent stake in the new Tianjin Centre, a mixed-use development incorporating a 49-storey office tower, retail space, serviced apartments and a Raffles hotel. The fund also has a 52-per-cent joint venture interest in the repositioning of the Guangdong Development Bank Tower in Shanghai. The project is near the 2010 World Expo site.
© 2008 Sydney Morning Herald