While much debate and commentary on dwelling prices in all capital cities have been ongoing for the last 12 months, many reports miss the fact that inner Melbourne metro developments are actually continuing to grow due to a building model based on Asian cities whereby new towers are constructed for multi use townships rather than just solely accommodation based investment.
We are no stranger to the idea of building towers with shops on the bottom and apartments above, however, the new model of mixing traditional shops, office space and apartments in one continue to see high turnover for construction firms, thanks for foreign investment from the giant Asian companies, most of which come from Malaysia.
Malaysian construction companies have seen endless growth over the last few decades, the likes of which we have never even come close to in Australia, with that success comes large revenues and available capital, making their partnerships with local Australian construction firms welcome, as local companies would struggle to find this type of capital investment from any local sources.
While state governments argue over 200 million, 500 million or 1 billion dollar ‘mega-projects’, Asian companies are investing this type of money directly into partnerships with local Australian construction firms, creating thousands of jobs for labourers, contractors and skilled construction workers.
At the same time, the type of developments they are offering are world class, aiming for the upper middle class there is no shortage of buyers, and coupled with the ease of foreign investment into new apartments, this type of partnership is extremely low risk for Australian companies, and adds a large amount of profit to each companies bottom line.
Developments in Melbourne are particularly popular with many new towers going up every week, the most popular areas are the Brunswick / Coburg / Carlton areas, Box Hill and the Inner Metro areas, travel through any of these suburbs at night and you can count the illuminated crane signs shining brightly with a mixture of local companies and foreign construction firms branding.
Takeaway
There is no slowdown of this type of investment in Melbourne, and while Sydney has seen a decline in new developments, there is still a huge amount approved each week and with the type of backing these developers have, they are very unlikely to fail. Investors should consider looking into these firms and their share prices, it may be an under-looked area in terms of short term gains.
