The Chinese property developer threatening the health of the world’s second biggest economy has an Australian connection with Evergrande’s billionaire founder six years ago forced to sell a $39million mansion on Sydney Harbour.
Xu Jiayin was at the centre of a political storm in Australia in March 2015 after it emerged China’s 15th richest man had failed to seek permission to buy Villa del Mare in Point Piper.
This harbour front section of Sydney’s eastern suburbs was home to future prime minister Malcolm Turnbull and Aussie Home Loans founder John Symond.
Mr Xu, who founded Evergrande in 1996, loved this ritzy postcode where mansions with a pontoon for the boat are a much more common than mega high-rise apartments.
The Chinese billionaire founder of embattled property developer Evergrande was six years ago forced to sell a $39million mansion on Sydney Harbour
Xu Jiayin was at the centre of a political storm in Australia in March 2015 after it emerged China’s 15th richest man had failed to seek permission to buy Villa del Mare in Point Piper
The trouble is he forgot to tell the Foreign Investment Review Board about his November 2014 purchase of a six-bedroom, Mediterranean-style residential house on Wolseley Road in Australia’s most expensive and exclusive suburb.
Then Liberal treasurer Joe Hockey, in the final months Tony Abbott’s prime ministership, announced the forced sale of Villa de Mare, less than half a year after LJ Hooker at Double Bay oversaw the trophy transaction.
Under Australian law, foreigners must seek approval from FIRB before buying residential real estate.
Temporary residents are limited in the level of existing properties they can purchase.
Mr Xu had bought the mansion through an Australian company but the foreign investment watchdog determined its position as a shelf company for a Hong Kong-based real estate group meant the transaction breached regulations.
The billionaire was given 90 days to sell the property. While his wealth has shrunk by 80 per cent during the past four years, Bloomberg estimates he is still worth $12billion, which in Australian dollars would still put him among Australia’s top ten high net-worth individuals.
When he bought a Sydney Harbour mansion, Forbes estimated he was China’s 15th richest man.
Villa del Mare’s previous owner, recruitment agent entrepreneur Julia Ross, put the mansion on the market in August 2014 before Mr Xu secretly bought the grand home in October, settling in November that year.
This harbour front section of Sydney’s eastern suburbs was home to future prime minister Malcolm Turnbull and Aussie Home Loans founder John Symond
Mr Xu, who founded Evergrande in 1996, loved this ritzy postcode where mansions with a pontoon for the boat are a much more common than mega high-rise apartments
The company listed on the Villa del Mare’s settlement papers, Golden Fast Foods Pty Ltd, was linked to Mr Xu’s , Evergrande, the builder of massive apartment towers.
China is now home to 65million empty apartments, with enough accommodation to house 90million people in a nation of 1.4billion.
Evergrande’s debt woes are threatening to cause a major slowdown in China, Australia’s biggest trading partner.
China’s second biggest property developer on Tuesday missed a third annual interest payment deadline to bondholders, this one worth more than $200million.
Evergrande owes more than $400billion to creditors just as the Chinese Communist Party government cuts back on steel production to meet net zero by 2060 climate change targets.
This has caused the spot price of iron ore, Australia’s biggest export, to halve from $US200 a tonne in late July to less than $US100.
Westpac senior economist Elliot Clarke said investors in China stood to lose lots of money, with Evergrande facing an uncertain future.
‘With the equivalent of US$300billion in liabilities and a layered, opaque financing structure, it is an immensely complex and uncertain situation that will surely see some market participants incur significant losses,’ he said.
Then treasurer Joe Hockey, in the final months Tony Abbott’s prime ministership, announced the forced sale of Villa de Mare, only five months after LJ Hooker at Double Bay oversaw a trophy transaction
The mansion’s previous owner recruitment agent entrepreneur Julia Ross put the mansion on the market in August 2014 before Mr Xu secretly bought the grand home in October, settling in November that year
Mr Xu had bought the mansion through an Australian company but the foreign investment watchdog determined its position as a shelf company for a Hong Kong-based real estate group meant the transaction breached regulations
Then treasurer Joe Hockey intervened after the Foreign Investment Review Board found the Evergrande founder had breached rules on foreigners buying residential property
But Mr Clarke said Evergrande’s possible collapse would be unlikely to cause long-term damage to the Chinese economy, despite comparisons with the demise of US financial services giant Lehman Brothers in 2008 at the height of the Global Financial Crisis.
‘For China’s real economy, even the company being broken up will prove but a small and temporary negative,’ he said.
For Australian property investors, houses are continuing to be much more valuable than apartments with the national gap between the two kinds of properties at a record high 34.4 per cent in September, CoreLogic data showed.
Sydney’s median house price of $1.312million in September 2021 was 30 times less than the market value of Villa del Mare in 2014 – during a previous property boom.
CoreLogic head of research Eliza Owen said the rapid growth in Australian property values had created affordability pressures, with the proportion of first-home buyers falling by 22.8 per cent since the start of 2021.
The company listed on the Villa del Mare’s settlement papers, Golden Fast Foods Pty Ltd, was linked to Mr Xu’s , Evergrande, the builder of massive apartment towers. China is now home to 65million empty apartments, with enough accommodation to house 90million people in a nation of 1.4billion (pictured are apartment towers in Ghangzhou in southern China built by Evergrande)
‘Perhaps a more bizarre outcome of the current housing affordability pressures are the anecdotes that have emerged around difficulties upgrading,’ she said.
Across Australia, house values have risen by 22.9 per cent during the past year, compared with a 12 per cent increase in median apartment prices as national property values rose by 20.3 per cent – the fastest annual pace since June 1989.
The Reserve Bank has promised to leave the cash rate on hold at a record-low of 0.1 per cent until 2024 but the Australian Prudential Regulation Authority, the banking regulator, is now requiring lenders to assess the ability of borrowers to cope with a three percentage point increase in mortgage rates.
The major banks are still offering fixed mortgage rates of 2 per cent.
Now Evergrande is threatening to cause a major slowdown in China, Australia’s biggest trading partner (pictured are Chinese flags near Evergrande’s headquarters at Shenzhen)
***
Read more at DailyMail.co.uk