Foreign Investment update 2016.

 

Truth in Australia brought you earlier a report on total foreign investment in Australia, yet the data was only complete till 2015.

Foreign Investment Review Board Just released their 2015-2016 report and can now be reviewed on the Australian Government website.

https://firb.gov.au/about/publication/2015-16-annual-report/

For a third year running China has out paced other nation’s foreign investment spending within Australia.

2016 list of total foreign investment

Real estate investment

Not only has China poured the most amount of money into Australia for the third year running, it has once again concentrated the bulk of its money into the ever growing real estate market.

A total of $122 billion was spent on Australian real estate by all foreign nations in 2016, of which China had a  26.1% share.

At first glance it would seem like more doom and gloom for Aussie home buyers as the pressures of purchasing their homes are compounded by having to compete against wealthy foreigners.

The raw figures do not tell the whole story and there is some good news for home buyers in Australia.

Of the $122 billion of foreign investment $49 billion was in the commercial sector with the balance of $72.4 billion going to the residential market.

commercial property sales 2016

Further more, of the $72.4 billion of residential purchases in Australia their was a decrease in purchases on existing dwellings as the bulk of the money was spent on development projects and new dwellings.

In 2015, $11.5 billion was spent on existing dwelling by foreign parties. In 2016 we saw a 36.5% decrease in expenditure to $7.3 billion.

This is the lowest amount of money spent on existing properties since 2013 by foreign parties.

residential sales breakdown 2016

 

Approvals which are for development, include approvals for new dwellings, vacant land and redevelopment of existing residential property that increases the housing stock.

So while property investment was quite intense, it was heavily concentrated in commercial and residential development projects.

This aligns with Australia’s foreign investment policy, which seeks to attract investment that increases the housing stock.

It also helps create jobs from construction and other related industries in the housing market.

Agricultural investment

The Agricultural Land Register was introduced in 2015 to increase transparency around the level of foreign ownership of agricultural land.

All foreign investors with an interest in agricultural land are required to register that interest, regardless of the value of the land.

As a result the government blocked a major transaction of a significant parcel of farm land by a Chinese majority consortium of the largest cattle ranchers in Australia owned by S. Kidman and Co. Limited (Kidman).

Kidman was Australia’s largest private landowner, holding 101,411 square kilometres equal to approximately 1.3 per cent of Australia’s total land area and 2.5 per cent of all agricultural land. It comprises of ten enormousness cattle ranchers

kidman land

The Australian treasury was not satisfied that the bidding process, for this significant land parcel, included enough parties.

In addition the portion of land at  Anna Creek site, has significant landholdings within the Woomera Prohibited Area (WPA) defence zone in SA. This posed a national security issue and the initial sale was blocked.

In Oct 2016 Kidman once again listed the land for sale this time attracting a broader range of purchasers including new Australian bidders.

Australian Outback Beef Pty Ltd, 67 per cent owned by Australian entity Hancock Beef Pty Ltd and 33 per cent owned by Chinese entity Shanghai CRED Real Estate Stock Co. Ltd, entered into an agreement to acquire up to a 100 per cent interest in Kidman, EXCLUDING the Anna Creek property.

Satisfied that both national security interests were protected, as well as Australian parties had sufficient opportunity to participate in the new sales process, the transaction was approved.

Despite Chinese involvement in this major transaction, the  United States was still the most prolific purchaser in 2016.

The US spent a total of $1.3 billion on Australian agricultural lands last year.

As of Sept 2016 the foreign nations that control the most amount of Agricultural land are listed below.

agricultural land split

However with the recent 33% participation in most of the Kidman sale (the Anna Creek site was excluded from the sale process), China is likely to have overtaken Singapore to secure the 4th spot behind the Netherlands in overall agricultural investment.

Source: https://cdn.tspace.gov.au/uploads/sites/79/2016/08/Register_of_foreign_ownership_of_agricultural_land.pdf

Other significant investors

2016 saw some surprise rises in investment from both the Netherlands and the United Arab Emirates.

The reason for the increase level from these two countries was due to major business transactions involving Australian assets.

BG Group, a British multi national oil and gas company, was bought out by Royal Dutch Shell that had significant assets within Australia, which were also purchased during the take over.

The United Arab Emirates were a major consortium member involved in the 99 year lease of Trans Grid. Trans Grid manager and operator of high voltage transmission network in NSW and the ACT.

The United Arab Emirates also received approval for a number of large value investments in commercial real estate.

Conclusion

Despite China being the single largest source of foreign investment three years running, the US and UK still control close to 45% of the total foreign investment ownership of Australian assets,  leading all other nations by a massive margin.

 

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