Growing Opportunities Draw Asian Developers To Melbourne

By Christine Lim

KUALA LUMPUR, June 26 (Bernama) -- Growing opportunities in Australia's second most populous city, Melbourne, are drawing Asian property developers to expand their footholds there.

Its vibrant city life, booming financial services and education centres, growing population and housing shortage are factors that drive developers and investors into the Melbourne property market.

Sam Nathan, Director of Australian-based property consulting and valuations firm Charter Keck Cramer, said that presently, there were several projects in Melbourne undertaken by Asian developers.

"Overseas investors are also coming into Melbourne and prefer to purchase properties from these overseas-based property developers based on their confidence in these companies," he told Malaysian journalists during a familiarisation trip to SP Setia's property project in the Central Business District of Melbourne.

One of Malaysia's leading property development companies, SP Setia, made its foray into the Australian property market with a recent debut of its mixed development project in Melbourne.

The company is holding a public preview of the Fultan LN project in Melbourne today at JW Marriott Hotel in Kuala Lumpur.

Nathan said there was increased acceptance of apartment living in Australia due to changing household mix now with more percentage of singles and couples without children.

The Central Business District of Melbourne has also emerged as an interesting place to live in with government initiatives to promote the city as a vibrant place.

"In 1990, Australia was generally in a bad recession and Melbourne at that period of time had a lot of older office buildings. But now, there is a lot of development taking place with these older commercial buildings converted into residential apartments," Nathan explained.

Melbourne's apartment planning activity, he said, had doubled in the past three years and had seen stronger growth than any other cities in Australia.

Still, there was no oversupply situation unlike what was generally perceived, he said.

Since 1990, he added, Melbourne had delivered close to 60,000 new apartments but the commencement of projects had been slow with only 45,000 apartments being released in the past 10 years.

"There are some projects that are not going to proceed as there are some developers who do not have the financing to undertake projects," he said.

Chief Executive Officer of Setia Melbourne Development Company Pty Ltd from the SP Setia group, Choong Kai Wai, told reporters during the tour that post-financial crisis, property developers had found it tougher with banks imposing more stringent requirements on capital financing for projects.

"Not only do property developers have to ensure that they have secured 60 per cent of development sales, they have to also cover 30 per cent of construction cost on their own before banks will agree to lend money," he said.

Thus, he said, only developers with financial strengths were able to undertake projects.

Nathan said that with this scenario, there was a big shortfall in supply as demand had outweighed supply, and this had pushed property prices to unsustainable levels.

"Affordability has become a big issue in Melbourne not just for owner occupiers of apartments but also rental," Nathan said.

He said rent growth in Melbourne apartments was higher than inflation.

The steady Australian economy with no significant impact from the global financial crisis, he said, would futher underline the strength and robustness of the property market in Melbourne.

"There is a real estate investment culture here. Melbourne's apartment market is not speculative," he said.