Macau | Australian real estate sparking large interest from Macau buyers - Industry insiders

The possibility of better investment yield, higher-profile tenants and longer lease contracts have led to a spur in interest by Macau investors in Australian real estate industry, insiders told MNA

Macau (MNA) –  Better investment yield, high profile tenants and longer lease contracts have led to a spurt in interest by Macau investors in Australian real estate, particularly in Melbourne, local and Australian sources told Macau News Agency (MNA).

“If you are holding a building for 10 or 20 years, Melbourne has many attractive points over Macau,” the Managing Director of real estate company Jones Lang LaSalle (JLL) for Macau and Zhuhai, Gregory Ku, told MNA.

Last month, a 12-storey office and retail building in Melbourne sold for A$40.1 million (US$30.35 million/MOP245.33 million) to H Group Australia, a company belonging to Ho Ho Brothers, a firm linked to Henry Ho, the son of local real estate businessman Ho Chun.

According to Mark Wizel, National Director for commercial real estate services CBRE, which brokered the deal, there is “absolutely no doubt that there has been a real shift in interest in Australian – particularly Melbourne – property investment in recent years from Macau”.

“Given Macau has one of the highest levels of per capita GDP in the world, it is not surprising that we are seeing an increase in investment in Australian property,” he commented.

According to information previously provided by the CBRE Melbourne to MNA, a total of three properties in Melbourne, including 454 Collins Street, have been sold to Macau buyers for some A$250 million.

These include a 20,250 square metre floor area building in 12 Riverside Bank in the Southbank of Melbourne – former ExxonMobil’s headquarters – which was sold for A$160 million to a company held by Keong Kuong Loi, owner of the Rio Casino in Macau, and an 18-storey building sold for A$90 million to local resident Weng Lin Chan.

“The Collins Street purchase along with those of 50 Franklin Street and 12 Riverside Quay, Southbank, have given greater prominence to the Macau investment community, a community that has, to a degree, flown under the radar, perhaps due to buyers having only been identified in the press as Chinese,” Mr. Wizel added.

According to the CRBE National Director local buyers often have family links to Melbourne such as their children going to school in the city or family members residing there. However, there are other factors raising interest such as “significantly stronger yields than the buyer could expect at home, and Australia’s relatively stable political and economic climate.”

“The Macanese also seem to have a special financial acumen and sophistication with regard to property investment that puts them at an advantage when considering property values and the prospects for growth. We expect to see an increasing level of investment in Australian property in the coming years,” he added.

For the Deputy Consul-General (Commercial) & Senior Trade Commissioner – Hong Kong & Macau, Sam Guthrie, another reason is that Australia’s economy is in its 27th year of consecutive annual economic growth, with the country also having “strong and stable financial institutions” and a “well-regulated land title system.”

“In the commercial property space, Australian yields are attractive for many institutional investors, including private funds in Hong Kong, Singapore and Malaysia who are strong in the office market, as well as for other assets such as shopping centres, hotels and to a lesser extent industrial property,” he told MNA.

Higher profile, higher rent

The same factors were described by Mr. Ku, who told MNA they had received several requests by local residents wanting to purchase property in Australia, and stating two years ago JLL had brokered a deal of over A$300 million for a local buyer.

“We have had several serious enquiries on Australia due to a few reasons. First, investment yield in terms of rental, especially for office properties, are much higher than in Macau. In Australia, investors can get a four to five per cent yield but in Macau only about two per cent,” he stated.

Another important differentiating factor is the quality of office and commercial properties in Melbourne when compared to the city, with Mr. Ku saying that for the cost to purchase a D or C grade building in Macau, one could get an A grade building in Australia.

Ku also claimed that tenants in Australia tend to sign a very long lease of maybe six to ten years, more stable when compared to the two to three years lease contract in Macau.

“In Macau, office tenants are not of the same scale as in Australia, they are usually startups and not well known international companies. There are not a lot of multinational tenants in Macau. They are mostly local tenants who are very sensitive to rent changes,” Mr. Ku added.

[Edited by Sheyla Zandonai]