Greenland Turns to Queensland as China Home Sales Slow

Greenland Holding Group Co. is looking to Queensland state to drive growth in Australia as demand in China slows, and Sydney and Melbourne prices become too expensive.

The Chinese state-owned developer is focusing on the Gold Coast, a city about 80 kilometers (50 miles) south of the state capital Brisbane, Sherwood Luo, managing director of the company’s Sydney-based subsidiary, said in an e-mailed response to questions. It’s mostly interested in residential and hotel development, he said.

Closely held Greenland, one of China’s most active global developers, is on track to hit A$20 billion ($17 billion) of investments around the world this year, as the property market at home falters and the nation allows freer movement of funds in and out of the country. The company has put A$1.6 billion into Sydney and Melbourne since it entered Australia last year.

“Prices are becoming more expensive in Sydney and Melbourne and thus people are looking at new markets such as southeast Queensland,” Luo said. “Gold Coast is attractive as the median unit and house prices are far lower than in Sydney and Melbourne.”

The median dwelling price for the Brisbane-Gold Coast area is A$440,000, compared with A$680,000 in Sydney and A$555,000 in Melbourne, according to RP Data Pty.

Dwelling prices in the Brisbane-Gold Coast market have risen 9.6 percent since a May 2012 trough, compared with a 30 percent increase in Sydney and a 21 percent jump in Melbourne, according to RP Data figures.

Falling Sales

Greenland is expanding offshore as conditions at home worsen. The number of publicly traded Chinese developers with liabilities exceeding equity climbed to 136 out of 334 from 57 in 2007, according to data compiled by Bloomberg. Home sales shrank 10 percent in the first nine months of this year.

Standard & Poor’s in September revised Greenland’s outlook to negative from stable, citing unfavorable market conditions and the company’s “considerable” capital needs.

“Greenland Group’s aggressive growth appetite and debt-funded expansion will constrain its financial risk profile in 2014 and 2015,” according to the S&P report. The developer “will continue to make significant land acquisitions and incur substantial construction costs over the next 12-18 months to support its growth plans, including in overseas markets.”

Luo declined to comment on the report.

Greenland is partnering with billionaire James Packer’s Crown Resorts Ltd. to bid for the Queensland state government’s Queen’s Wharf venture in Brisbane, which would include a six-star hotel and casino.

“We value Queensland as an essential area of great strategic significance for building up our business throughout Australia,” Luo said.

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