International governments, super funds and global business giants cashing in on Aussie home building boom revealed

October 8, 2024

International property giants and super funds are splashing huge sums buying into Aussie builders and developments as they look to cash in on the nation’s housing crisis.

While the investments from across Japan, South-East Asia, the United States, Canada and United Arab Emirates could bring down home prices and rental costs for Victorians, key building industry figures have warned it could squeeze some companies out of business.

The nation and Victoria’s biggest builder, Metricon, this week revealed it has all but finalised a $115m deal to become 51 per cent owned by Japanese giant Sumitomo Forestry Group.

The Japanese giant is also the owner of Henley Properties Group, Victoria’s seventh-biggest builder, as well as Wisdom Homes in NSW, and the Scott Parker Group in Western Australia.

The series of acquisitions have been underway since 2008 and will end with Australia’s biggest builder being based in Japan, and 12 per cent of Australia’s new homes being built by companies at least partially owned offshore.

The nation’s second biggest builder NXT Group, is already owned by Japanese corporation Asahi Kasei, and has an about 11 per cent stake in Victoria’s fifth largest builder: Simonds Group.

International developers now dominate Melbourne’s city skyline with three of the city’s four tallest towers built by offshore developers, and more on the way.

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Metricon chief executive Brad Duggan announced that his firm was in the midst of being purchased by Sumitomo Forestry.

Prominent housing industry experts believe state and federal housing targets that will add hundreds of thousands of homes to our suburbs are drawing international giants to our housing sector, and that they cannot be reached without significant increases in foreign finance.

Housing Industry Association chief economist Tim Reardon said offshore ownership in Aussie building businesses had increased since the global financial crisis, but more international activity was needed to reach the nation’s housing targets.

“The worst own-goal in the housing crisis is that state governments taxed foreign investors out of the market,” Mr Reardon said.

He noted that increased foreign ownership among big builders could lead to a greater impact from “vertical integration”, or supply chain streamlining, that can help homebuyers with more efficient housing construction.

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Henley Homes was bought out by Sumitomo in 2008, but has remained one of Victoria and Australia’s biggest building groups — and still produces Australian-minded display homes like this Sahara display home in Point Cook.

However, the economist warned it could also result in mid-tier operators who normally build 100-300 homes a year struggling to compete with an increasingly efficient top tier of builders.

Builders Collective of Australia national president Phil Dwyer said adding an international connection to already big building firms would make it harder for mum and dad-level builders to stay in business.

“These bigger companies have buying power for materials that the rest can only ever dream about,” Mr Dwyer said.

“Smaller builders have been struggling to compete for the past decade and now more and more are just getting out altogether.”

International developers are also driving Melbourne’s skyscraper market, with the city’s four tallest towers today including Australia 108, developed by Singapore’s Aspial Corporation, Aurora Melbourne Central, created by UEM Sunrise from Malaysia, as well as the Hong Kong-based Far East Consortium’s West Side Place.

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Malaysian developer UEM Sunrise oversaw the creation of Melbourne’s third-tallest tower: Aurora Melbourne Central.

The city’s future tallest skyscraper, STH BNK by Beulah, is being developed by historically Malaysia-linked, but Melbourne-based Beulah.

Co-founded by Adelene Teh, the daughter of Malaysian development industry giant Dato Teh who headed IJM Corporation Berhard, its past projects have attracted significant investment from Malaysia-based buyers.

While the STH BNK by Beulah site has significant funding from Australia’s biggest bank, the CBA, a number of its ritzy homes have sold to offshore buyers, including a $38m apartment that set Melbourne’s apartment price record early last year.

Meanwhile, one of the city’s biggest active development sites, the $2.8bn Melbourne Square project in Southbank, is being created by OSK — a Malaysian firm headed by Ong Leong Huat, one of that nation’s 50 richest people.

And the city’s surging build-to-rent market is also being heavily funded by internationals hoping to cash in on the rising number of tenants expecting to lease a home long term.

The world’s biggest commercial property owner American-giant Blackstone owns the 437-apartment Caulfield Village complex, while Canadian pension fund-owned Oxford Properties have backed a now partially built $180m tenants-only Southbank development by local developer PDG.

Other international groups buying into Melbourne’s build-to-rent market include Singapore’s sovereign wealth fund, GIC, as well as American-based Sentinel Real Estate and the Abu Dhabi Investment Authority which invests for the United Arab Emirates city’s government.

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Caulfield Realm, the newly constructed retail precinct below Caulfield Village is set beneath a 437 built-to-rent apartment complex owned by American giant Blackstone.

Charter Keck Cramer research national executive director Richard Temlett said an Australian goal of building 1.2 million homes over the coming five years and the Victorian government’s gazetted 800,000 new homes in a decade plan were “strong pull factors” for these groups.

“Australia is a very attractive country, and they (foreign firms) have a very important role to play — we need that international capital, and it needs to be embraced,” Mr Temlett said.