Moelis has foot in door as Australian property braces for 888

SYDNEY, Feb. 21 (Xinhua) — Announced with fanfare in November last year, Australia’s bold play to revolutionize independent Chinese investment through a ‘lucky’ 888 Visa has produced a scramble among fund managers, once again placing Australia’s property market in the international spotlight.

Following similar ploys from regional competitors such as Singapore and New Zealand, the ‘Significant Investor Visa’ (Sub Class 888) has been described by the federal government as offering a win-win partnership that should see citizens of both nations prosper.

Its strategy is to entice investors with no required English tests and a spare 5 million Australian dollars (5.2 million U.S. dollars) to deploy – investors are given the freedom to work in and travel to and from Australia for a period of 4 years, with an option of permanent residency.

According to Australia’s Bureau of Statistics (ABS), 17,580 Chinese settled permanently in Australia last year, up 11.4 percent over 2011 and almost 20 percent higher than 2010.

Mandarin is now the second most popular language in Australian homes.

Flourishing on the coattails of China’s ongoing resources banquet, the mining and resources sector has provided the two- speed Australian economy with buoyancy during a global financial crisis that has all but swamped the western hemisphere.

The symmetry between the Chinese and Australian economies and cultures are obvious, yet Australia retains critical points of difference in the competitive race to attract astute Chinese investment with Australia’s thriving and stable real estate market the major attraction.

In a speech in Perth earlier this month, China’s Deputy Consul General Mr Liu Yutong, praised Australia’s capacity in harnessing China’s growth as a key driver of prosperity.

Although bilateral trade now stands well above 120 billion Australian dollars annually, China ranks just sixth as a source of direct foreign investment in Australia and accounts for only four percent of the total. Yet that investment is famously shrewd and the 888 visa opens the door for private investment.

“China has been Australia’s biggest trading partner and export market.” Liu said. “The rapid economic development of China has in fact driven the prosperity of Western Australia. That partnership will continue.”

Now this partnership is set to play out on a more personal level, with wealthy Chinese invited to invest their private wealth into Australian funds through the lucky 888 visa, a system that provides immediate family with full work, travel and study rights and holders are required to spend just 40 days per year in Australia.

New South Wales Deputy Premier Andrew Stoner told Xinhua the key state of NSW has “much to offer China”, and that “by working together on finding solutions in areas of common interest’ the opportunities to unearth wealth by broadening and deepening current ties are enormous.

With opportunities in commodities, education, tourism, research and development, professional services and manufacturing — common priorities for both Australia and China — NSW is bound to be popular with 888 applicants, Stoner said.

Since the government’s announcement of the new 888 pathway for migrant investors in November, investment bankers have been scrambling to develop products compliant with the Visa’s terms to smooth the way for keen 888 newcomers.

Global investment firm Moelis Co was instrumental in advising the government in the formulation of the Visa policy prior to its release, and recently travelled to China to promote their 888 plan.

Despite a low national take-up, the Moelis Co fund has already attracted a significant number of investors from China, due to their prior commitment and connections within the dynamic Australian real estate sector.

Consistently delivering results, the property market here has continuously outperformed Australian stock and bonds

Andrew Martin, Moelis Co managing director, told Xinhua that real estate had proven to be inoculated against global financial shivers.

“Australian real estate has experienced very strong historical performance, enjoying total returns averaging ten percent for the past 10 years. The market is embedded in Australia’s unique socio- economic environment lifestyle, living standards, infrastructure, education the quality of life here provides the market with a confidence that continued to deliver returns throughout Asia economic crisis and even the global financial crisis in 2008,” he added.

Since 2011, Australia has been a hotspot for foreign interest in the property market, with several factors making it the ideal place for investment, according to Kevin Stanley, CBRE’s executive director for global research and consulting.

“There are many motivators, all working together… Australian yields remain high by global standards …[and] …the search for an economy with a half-decent outlook and an ease in doing property business and Australia is an obvious choice for global investors,” Stanley said.

Australia’s uninterrupted GDP growth, low unemployment rate, strong banking system (with four of the world’s top 20 safest banks) and stable and transparent government and legal systems all add to its attractiveness in investors’ eyes,” added Martin.

With an expected flood of foreign money beginning to have an impact, experts have predicated 2013 to see another ascent on the back of positive data.

“Last year 30 percent of real estate purchased in Australia was by foreign investors. Many of these investors were from ( mainland) China, Hong Kong and Singapore. They have a positive view on Australian real estate,” Martin told Xinhua.

“Looking forward, we at Moelis have a very positive outlook for returns from Australian real estate, but this is not just our view — this view is shared by many of the world’s largest investors and experts.”

Sarah Nelson, Communications Director at Sunshine Property Group (SPG), a China exclusive property-sourcing platform, told Xinhua that Chinese buyers sought quality above all else.

“What sets apart the Chinese investor in our view, is family. Chinese investors seek returns with family in mind, so there is a bottom line of stability and quality.” Nelson told Xinhua.

“And of course the Australian property has delivered both for many, many years.”

It’s a point of difference that Moelis hopes will differentiate its property fund.

“Our fund will invest on a diversified basis across different sub-sectors including office buildings, industrial warehouses and retail shopping malls. (We) will primarily invest in existing buildings which have existing tenants with long term leases to major companies and government agencies,” Martin said.

“Local knowledge and relationships are key to investment success. We prefer office buildings in Brisbane and Perth, certain retail malls and industrial warehouses in Sydney and Melbourne.

“Our aim is to protect capital and make steady income returns from consistent rental yields and gains on the eventual sale of the buildings,” he added.

Jonathan Granger, of the NSW Migration Institute of Australia, told Fairfax the new visa system gave migrants more flexibility to maintain business interests in Australia and China.

Sarah Nelson said that’s what makes Chinese migrants so welcome.

“Chinese buyers want the best for their family, and for China. That’s why they call it win-win.”

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Moelis has foot in door as Australian property braces for 888