Financial Troubles of China’s Top Developer May Affect Australian Property Market Amid Sydney’s Rising Rents

The Australian property market may face unforeseen challenges as financial woes befall one of China’s major property companies. Country Garden, a prominent Chinese developer, has experienced significant financial strains that have the potential to impact the Australian housing sector, particularly in Sydney and Melbourne.

According to Anne Davies in her article, Country Garden’s subsidiary, Risland Australia, is actively developing two extensive housing projects in the outskirts of Sydney and Melbourne. Any delays or potential collapse of these ventures can greatly affect the new housing supply, especially during the prevailing affordability crisis in the region.

Country Garden’s financial difficulties became more evident as its bonds and shares dropped sharply when it missed payments on its debt instruments. The company has now entered a crucial 30-day grace period, post which it might be considered in default. Furthermore, the company announced its anticipation of a hefty net loss of 45-55bn yuan ($11.7bn) for the first half of this year.

Risland’s main undertaking in Sydney, the Wilton Greens, which is approximately 80km away from the city’s CBD, is in its initial stages of construction. As per Risland’s spokesperson, “As indicated previously, there will be an expression of interest campaign for stages 3 to 6 of the project… This will allow Risland to rebalance its portfolio and continue to seek new opportunities to operate in the important Australian market”

This news emerges against a backdrop of Sydney nearing an alarming rental milestone. Data from SQM Research, cited by Fiona Killman, indicates Sydney is inching closer to a weekly house rent of $1000. Such escalating rental prices make Sydney the most expensive market in Australia, surpassing the national median by almost $400 a week.

Christopher Louis, SQM Research’s managing director, pointed out, “Clearly, acute rental shortages remain with us. And besides more people grouping together to share the burden, there is no significant solution on the horizon”. Mr. Louis further advised potential tenants, considering their work commitments, to think about relocating to regional areas where rental vacancy rates remain stable.

Both these unfolding scenarios in the property market underscore the need for comprehensive strategies to address the supply and demand imbalance. With Sydney’s rental prices soaring and potential interruptions in major housing projects due to overseas developers’ challenges, a multifaceted approach seems more necessary than ever.

References:

“Top Chinese developer’s financial woes cast shadow over Australian property market,” Anne Davies. ↩ https://www.theguardian.com/australia-news/2023/aug/15/top-chinese-developers-financial-woes-cast-shadow-over-australian-property-market

“Sydney nearing shocking rental milestone,” Fiona Killman. Financial Troubles of China’s Top Developer May Affect Australian Property Market Amid Sydney’s Rising Rentshttps://www.realestate.com.au/news/no-significant-solution-to-rental-crisis-as-sydney-nears-weekly-median-house-rents-of-1000/