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Foreign investors looking to buy Australian assets will be put off by the federal government’s surprise move to block China State Construction’s $300 million buyout of Australia-based builder Probuild on security grounds, investment bankers warn. Meanwhile, the property sector says it will be scrutinizing the decision’s long-term effects.
Increasing delays in gaining official approval for deals could also push foreign funds to take their business elsewhere, according to a report by The Australian. David Williams, chairman of investment bank Kidder Williams, told the publication that foreign investors were waiting for at least six months to get deals reviewed by the Foreign Investment Review Board – putting them at a competitive disadvantage.
Williams said that he is advising potential Chinese buyers not to bother bidding for Australian companies, since they would most likely be rejected after waiting through a six-month review period.
Read more: Chinese homebuyers standing by as Sino-Australian relations sour
“The result [of the Probuild deal rejection] will affect not just Chinese bidders,” Williams told The Australian. “Foreign investors will not bid because the timetable can’t work in a competitive process.”
On Wednesday, Probuild was awarded contracts to take over the $730 million development of a landmark Sydney construction project and Grocon’s $100 million Northumberland office project in Melbourne, The Australian reported.
Probuild will work on the partially completed Ribbon hotel development in Darling Harbour, taking the reins after the collapse of construction giant Grocon.
The Property Council of Australia said that the real estate industry would be scrutinizing the government’s Probuild decision for its long-term implications for foreign investment in the building sector.
“FIRB has a valid and important role in assessing security issues associated with foreign investment,” said Ken Morrison, CEO of the Property Council. “We’re not in a position to second-guess its decisions. Industry operators have been closely watching the evolving foreign investment framework over recent months and have been factoring in the more stringent thresholds, increased costs, and longer time frames for FIRB decision. There’s no doubt the industry will be looking closely at this latest decision and reflecting on its consequences for future investment and transaction proposals.”