Loss aversion angst grips Chinese developers as Australian housing market fades

By Zheng Yangpengyangpeng.zheng@scmp.com / https://www.scmp.com/property/international/article/3006433/loss-aversion-angst-grips-chinese-developers-australian?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp | April 22, 2019 6:52 PM SGT
Mainland Chinese developers that arrived just as the Australian housing boom began to fade may have to choose between cutting their losses on investments that have turned sour or waiting for a recovery, analysts said.
Which route they take would depend largely on their size and financial firepower, with the ­option of taking losses upfront by unloading land to other developers seen as appealing to smaller companies, while those that bought into the market near the peak in late 2016 are in a position to hold on in the hope that the market will eventually recover.
The decline in the Australian market has been particularly hard on Chinese developers with holdings in far western areas of Sydney, including those with small projects of fewer than 50 units.
"We understand that at least half a dozen Chinese developers have put their land holdings on sale to other developers or land bankers, with sites that can ­accommodate at least 300 units," said Carrie Law, chief executive and director of Juwai.com, a real estate portal for Chinese buyers.
"They paid too much for the land and know too little about building. It's cheaper to sell now and lose a little money than it would be to go forward with ­construction and lose much more money."
After a six-year run of growth, the housing market in major cities in Australia entered a correction phase last year as banks tightened lending and the supply of homes ­increased. Demand from overseas buyers also tapered off, particularly after Beijing restricted investment in overseas property.
On a nationwide basis, prices retreated 1.9 per cent in 2018, while Sydney has seen a sharper decline of 14 per cent from its 2017 peak. Credit ratings agency Fitch forecast in January that Australian house prices would fall 5 per cent this...