A real estate fund that once managed around 2.8 billion yuan ($US448 million) and focused on Chinese properties has halted operations and is now looking abroad.

Fund management firm Harvest Real Estate Investment, run jointly by Beijing-based asset manager Harvest Fund Management and London-based Grosvenor Fund Management, is halting its investments in China. Harvest Real Estate is switching its focus to investing Chinese money in real estate outside the country, said James Raynor, chief executive officer for Grosvenor Fund Management.

Harvest Real Estate has also stopped fund raising for a planned $US500m dollar-denominated fund, called HREI China Total Return Fund, he added.

"We needed to balance where we felt the greater opportunity is going forward, and outbound was what we wanted to focus on," said Mr Raynor, adding that Grosvenor still considers China a positive long-term market.

Mr Raynor said Harvest Real Estate will cut some positions, though he didn't release details. In 2012, HREI had a team of 20 staff based in Hong Kong and Beijing.

More Chinese investors are looking to invest in real estate abroad, driven by high prices at home and a desire to diversify. Chinese outbound investment in commercial real estate reached $US7.6bn in 2013, more than double 2012's $US3.3bn, according to data from Jones Lang LaSalle. Some investors say foreign markets offer more opportunity and cheaper financing.

Meanwhile, the broader Chinese property market appears to be softening along with the rest of the country's economy. Developers are cutting residential prices in small cities as economists warn of overcapacity. Many property companies are also facing tightening credit, lower returns, slower demand for homes and intensifying competition amid a deepening supply glut.

Rong Ren, who headed Harvest Real Estate Investments since its inception in 2012, has agreed to leave the firm, a person familiar with his plans said.

Mr Rong was formerly managing director at Harvest Capital Partners, a real-estate fund set up by state-backed conglomerate China Resources Group, until 2012. Despite the similar name, Harvest Capital Partners isn't related to either Harvest Real Estate or Harvest Fund.

The person familiar with the situation said Mr Rong's departure isn't related to turmoil at China Resources, where Chairman Song Lin was stripped of his position by Communist Party officials for "suspected serious violations of discipline and law."

Stockland managing director Mark Steinert has questioned the governance of the board of takeover target Australand Property Group.

According to The Weekend Australian, Mr Steinert has struck out at Australand for not allowing it to conduct due diligence after lobbing its $2.4 billion bid.

“We put forward what we thought was a compelling and reasonable offer and all we’ve got back in return is ‘we don’t think that’s adequate’,” said Mr Steinert.

Meanwhile, the newspaper reports Steinert’s counterpart at Australand, Bob Johnston, has starred down Stockland's“threat” to dump its 19.9 per cent stake.

“I don’t know where Mark is coming from there,’’ Mr Johnston said.

“We have very good governance and are acting in the best interest of shareholders.”

Australian Gaming & Entertainment plans to raise $80 million in an initial public offering and has embarked on a five-city roadshow today to entice investors in Australia and Asia to buy shares in the future operator of gaming-centric pubs in Sydney, according to an email sent to Data Room.

CIMB and Wilson HTM are joint lead managers of the IPO that seeks to sell 80 million shares at $1 each. The offer price of the IPO is 12.6 times the company’s forecast 2015 net profit per share.

The proceeds of the share sale, together with a $43m debt facility, will be used to initially acquire five pubs in Sydney’s western and southwestern suburbs. The portfolio is being acquired at a weighted average capitalization rate of 10.5 per cent, a premium of about 6 per cent to the Australian 10-year bond rate.

About 70 per cent of Australian Gaming & Entertainment’s revenue is forecast to come from poker machines and the company hopes to acquire other similar pubs that are currently priced at $14m to $20m each.   

Today, Australian Gaming management are meeting investors in Brisbane and later this week will be in Sydney and Melbourne. On Monday next week, company management will be in Hong Kong and the next day are scheduled to visit Singapore.

The book build begins May 8. The shares are expected to begin trading on the ASX on June 3.

CIMB and Wilson HTM are expected to garner fees of $3m from managing the IPO.

(Brett.Cole@businessspectator.com.au)  

(Editing by miranda.maxwell@businessspectator.com.au)

Nathan Tinkler and Harry Triguboff are among property developers who stand accused of using Liberal party slush funds to sidestep the ban on property developers making political donations, The Australian Financial Review reports.

According to the newspaper, Geoffrey Watson, SC, has told the Independent Commission Against Corruption that he would give evidence of “systematic subversion of the electoral funding laws of NSW”.

 Mr Watson said Mr Tinkler paid $66,000 and was one of many property developers, including Mr Triguboff, that paid over $200,000 to a company called EightByFive, run by Tim Koelma, a staffer of former energy minister Chris Hatcher.

The AFR reports that in exchange for the funds Mr Hatcher helped Mr Tinkler’s firm BuildDev bid to build a coal loader in Newcastle and Gazcorp’s bid to secure planning approval for a shopping centre in Sydney.

1. Chinese buyers are cash buyers

There is a widely held belief that Chinese buyers pay for their real estate purchases in Australia in cash and there is little need for them to borrow. This could not be further from the truth. In fact, according to a recent survey from GiFang -- a Chinese language website that specialises in selling property to overseas investors -- conducted across 283 buyers online, 97 per cent of Chinese buyers in Australia rely on mortgages.

The big four banks have all established offices in China in order to assist China-based buyers to purchase Australian properties using home loans. Westpac is responsible for 70 per cent of all home loans from China, according to our survey results as well as a banking source.

These banks are responsible for making 85 per cent of all home loans of Chinese property buyers in Australia. This number is expected to increase to more than 90 per cent by the end of 2014. Chinese buyers generally accept the idea of investing with "OPM" (other people's money) and love the fact that a minimal amount is required to own or control real estate in Australia.

The situation is different in China where property buyers are forced to use more cash to buy properties. For example, Chinese banks will only lend up to 70 per cent of the value of the home to borrowers for their first purchase and 30 per cent for their second home. Third purchases are usually not allowed.

As a result, most Chinese buyers have no choice but to use larger amounts of cash. According to the results of 50 GiFang seminars in 2013, approximately 60 per cent of potential buyers were not familiar with how to purchase properties in Australia by borrowing from banks; less than 35 per cent were not aware of the "interest only" programs offered by most banks in Australia; and 17 per cent weren't even aware that they can borrow from Australian banks.

It is worthwhile pointing out that such awareness has dramatically improved over the last three years, thanks to the fast growing number of China-based agents who specialise in selling Australian properties.

2. Chinese investors buy on the spot

You have probably heard a lot of stories about Chinese buyers turning up at auctions with suitcases packed with cash and making an on-the-spot decision to buy the property without a proper inspection.

Very few of these stories are true or are at least exaggerated. In our survey conducted in China, 63 per cent of buyers said they would ask a friend or relative based in Australia to inspect the property for them, and the remaining 37 per cent believed it was a must for them to inspect the property personally before making the final decision.

Even if the property is an off-the-plan apartment, they will still travel to Australia to get a feel for the location and to conduct personal research. According to our survey, we found that less than 9 per cent of potential buyers would take 3 days or more to decide to purchase a property.

3.  Chinese buyers will buy over and above the market price

This is perhaps the biggest misconception of all. The reality is, purchasers from a foreign country are less likely to know what the market price is, and let alone be able negotiate a lower price.

At our property events in China, buyers often talk about Australian house prices in terms of a price per square metre. This comparison makes Australian properties look cheaper than they are, although the capital growth might not always be better. The fact is, they have little access to property data like we do here.

The stories about Chinese property developers buying in Sydney and Melbourne at prices above the market value are somewhat misleading and are largely based on comments made by agents to impress their vendors.

Chinese developers are especially smart with numbers, often working out the acceptable site acquisition cost based on a fixed return on investment, which then becomes the basis for negotiating the purchase cost with the vendor.

The misconduct of Chinese agents also contributes to the perception that Chinese buyers are willing to pay for above the market price. It is believed that one in 10 China-based agents are involved in selling Australian properties according to a two-tiered pricing structure.

Some agents sell at more inflated prices to China-based buyers. When developers promote house and land packages to buyers in China for areas such as Point Cook, Sanctuary Lakes and Tarneit, the land component of the package can sometimes have a higher price in China. They are “exclusive lots” for Chinese buyers that are only promoted in China.

4.  Chinese buyers do not care about rental yield (land banking)

In China, cities such as Beijing generally have a vacancy rate of 20-30 per cent and in some places like Ordos (a city in Western China), the vacancy rate is a jaw-dropping 73 per cent. The Chinese are used to properties being vacant as investors generally rely on capital gain and not rental yield. 

As Chinese investors become increasingly educated about the Australian market, rental yield becomes more and more important. Gifang's surveys in China show that more than 90 per cent consider rental yield an important aspect to their property purchase, with the acceptable rental yield at 5 per cent.

More than 72 per cent of investors consider capital growth as more important than rental yield but all of them prefer to have a balance. For residential properties, some Chinese investors would rather leave the property vacant for most of the year until they visit Australia and use their properties for personal enjoyment. These properties are usually beachside mansions and penthouse apartments.

Michael Yang is the CEO of GiFang.com, the largest Chinese language property site in Australia.

We have not fully realised it yet but China’s attack on its shadow banking system is an attack on the Australian economy. Australia is very intertwined with Chinese shadow banking in minerals, property and, of course, the Australian dollar and sharemarket.

The view in Australia has been that when the temperature in China gets too hot as a result of the shadow banking clamps, and unemployment starts to rise, China will pull back and all will be well in Australia. That’s probably right, but no one can be sure. Fasten your safety belts because I fear my previous alerts were correct (A nasty Chinese flu could hurt Australia, March 19).

Let me explain just how we have become part of the Chinese shadow banking system. Australia rides on the back of iron ore, coal and gas exports, and our residential property markets are being boosted by Chinese investment. The China Banking Regulatory Commission has warned Chinese banks to tighten controls over letters of credit for iron ore imports and that has caused a sharp fall in iron ore prices. Steel mills and traders had been using iron ore stockpiles to raise money as other sources of credit dried up. It was crazy financing, although it appears to have enabled the Chinese shadow banking system to access low-cost global loan money.

In physical terms, it looks like there is about $12 billion worth of iron ore on wharves or ships looking for a home, and a number of steel mills are facing bankruptcy. BHP and Rio Tinto are low-cost iron ore producers but if the China shadow banking squeeze is prolonged it will hit their profits.

Meanwhile, the squeeze will put even more pressure on higher-cost producers like Fortescue. It will also mean that Australian tax revenues will be hit hard. We will need a lot more than a levy. Not surprisingly, the coking coal price has also fallen, leading Peabody in Queensland to consider closing mines.

The Chinese shadow banking system used a similar method of crazy financing to enable property developers to build apartments in major cities. This time they used copper and gold, rather than iron ore, as the financing tools so there are large stocks of both metals -- particularly copper -- funding real estate. Many of the apartments are empty (The trouble with China's hot property, April 21). This is a Chinese version of the subprime loans in the US which caused the global financial crisis.

Again, it’s no surprise that apartment prices in Shanghai are falling and some reports even claim the discounts are up to 40 per cent. And if the shadow banking clamps continue, that property price fall in Shanghai will spread around the country -- certainly into the largest 10 or 20 cities, led by Beijing. That will, of course, slow development dramatically and affect demand for steel and other building products.

But a fall in Chinese property prices could have a more serious impact on Australia. Right now we are seeing a boom in Chinese buying and developing of apartments in Sydney and Melbourne and to a lesser extent Brisbane. We are looking at a Chinese-style glut of one and two bedroom apartments.

I do not know the connections between the Chinese shadow banking system and the level of Australian investment in either apartment development or other residential investment (Chinese money is driving a housing glut, February 18). But I know that many of the developers have big stakes in Chinese property and will be funded by shadow banking. If the Chinese keep the clamps on shadow banking, then Australia had better watch out.

Property developer Stockland is renewing calls on rival Australand to open its books so it can pursue its $2.4 billion takeover offer.

Releasing its latest market update, Stockland reaffirmed its expectations of a six per cent rise in earnings per share this financial year.

The developer said residential deposits for the year to the end of March had been the strongest the group had recorded for that period in four years.

Its residential business collected 1,500 net deposits during the quarter, with particularly strong demand in Queensland.

Chief executive Mark Steinert said the group's latest financial update clearly demonstrated it was achieving strong organic growth and was well placed to benefit from improving economic conditions.

He said Stockland believed its offer for Australand was highly compelling and would enable both companies to benefit from synergies and strong, sustainable growth prospects.

"We believe it is in the best interests of Australand securityholders for its board to provide access to due diligence and engage productively with us to seek a mutually beneficial outcome," Mr Steinert said.

However, he reiterated Stockland was prepared to walk away from a deal if price expectations among Australand securityholders were too high.

Australand's board believes a share-swap takeover proposal presented by Stockland is not in the best interests of Australand securityholders.

It also has rejected a request from Stockland to open its books and enable Stockland to carry out due diligence on a potential merger.

Stockland has proposed to offer 1.111 of its securities for each Australand security, valuing them at $4.20 each.

Lend Lease says it will commence development and funding of the third commercial tower at the Barangaroo South development, adding that PricewaterhouseCoopers Australia and HSBC Bank Australia have signed leasing arrangements for the building.

Lend Lease said it intends to introduce co-investors into the tower in future, but for now plans to fund 100 per cent of the building via existing capital sources.

The firm also entered an agreement to reduce its co-investment in Lend Lease International Towers Sydney Trust from 25 per cent to 15 per cent via a sale to international pension fund APG.

More to come

Australia's largest residential developer Stockland has raised the prospect of a guidance-beating full-year result as it ramps up the rhetoric against its uncooperative takeover target Australand.

Yesterday at its third-quarter earnings update Stockland again tightened its full-year earnings per share guidance to 6 per cent growth — at the top end of its previous range of 4 per cent to 6 per cent.

Stockland chief executive Mark Steinert left open the possibility of changes to Stockland’s $2.4 billion scrip bid for Australand by again refusing to rule out increasing either the merger terms or adding a cash component by selling assets to a co-investment partner.

“We have to look at our obligation to our shareholders in delivering the earnings accretion and the enterprise value accretion and making sure we maintain our A-1 credit rating and that we create a great combined business, and to the extent those things line up we keep an open mind.”

Stockland is maintaining a hard line publicly on the pricing of any deal. “But just because we have debt capacity, that wouldn’t give us any inclination to make a proposal at a higher price,” Mr Steinert said.

He also said it was possible that over time greater synergies could be achieved through the merger than the $15m Stockland pitched in its initial proposal. “We think there are a lot of good people at Australand. There may be some additional synergies beyond year one,” he said.

Buoying Stockland’s guidance was a strong quarterly result in its residential business, which achieved 1500 net deposits for the three months to March, led by the strongest result in Queensland since the first quarter of 2011.

Mr Steinert said the group was on track to settle slightly more than 5000 lots over the 2014 financial year, thanks to strong sales in its NSW estates.

“If Calleya (in Perth) was to come in with all the expected settlements then it would likely translate to earnings per security growth being a bit higher,” he said.

Stockland indicated it may top expectations of 5 per cent growth in EPS in 2015. It is now scaling up to be capable of producing and settling over 6000 lots in 2015 if the market remains strong, Mr Steinert said. “Anything around 6000 would take our growth rate above the broader targets,” he added.

A soft point in the results was the company’s retirement business, with Mr Steinert saying Stockland would now look to recalibrate its expectation of returns from the business.

Mr Steinert reiterated the company would not sell off its retirement business.

Stockland closed unchanged at $3.89, taking the value of its takeover proposal for Australand to just over $4.30 per share, up from an initial value of $4.20 and just ahead of that group’s $4.28 close.

US private equity giant Blackstone has staked its claim as a major force in the Australian property market with the purchase of its largest portfolio in an $826 million deal with listed player Mirvac Group.

Mirvac yesterday unveiled the sale of a half stake in landmark Sydney office building Westpac Place as part of the broader deal with Blackstone, which was sweetened with seven additional non-core assets from its property division.

Mirvac chief executive Susan Lloyd-Hurwitz said the transactions were key capital management initiatives for the group, which will pour the proceeds into its high-returning office and apartment developments.

“We are delighted to have entered into an agreement for the sale of 50 per cent of 275 Kent Street, Sydney, and to have secured another high quality capital partner in Blackstone to sit alongside Mirvac in one of our key strategic assets,” she said.

An affiliate of Blackstone Real Estate Asia forked out $435m to buy the tower stake at a premium to book value as part of the larger deal foreshadowed by The Australian.

Blackstone has also been granted independent call options over a portfolio of seven of Mirvac’s non-core assets for an acquisition price of $391.4m.

“The call option agreements for seven non-core assets have allowed us to accelerate our strategy to exit secondary assets with no development potential, while minimising transaction costs,” Ms Lloyd-Hurwitz said.

Once finalised, Mirvac’s portfolio will be heavily weighted towards core assets and it has been chasing other large office towers and shopping centres on offer.

Mirvac’s agents — Josh Cullen and Michael Andrews of CBRE and Rob Sewell, Paul Noonan and Simon Storry of JLL — cited the deal as setting new benchmarks in the market.

The CBRE pair noted the strong interest from offshore groups in Westpac Place that sold on a passing yield of 6.65 per cent, with the interest likely to be repeated for other assets that are on the block. The JLL trio also tipped further significant towers in Sydney’s CBD would change hands as the two firms are also marketing QIC Real Estate’s $500m tower at 52 Martin Place.

However, Blackstone’s opportunistic purchase of a series of non-core assets from Mirvac and the listed group’s hefty $156m in vendor financing were the most remarkable aspects of the $826m deal. These include the nearby $69.4m 1 Castlereagh Street in Sydney, as well as two office assets in Queensland that are worth nearly $70m.

Two industrial assets in North Ryde worth $72.7 million are also being sold part of the deal.

The Australian last week revealed the sale would include the $139.5m Waverley Gardens Shopping Centre in Melbourne.

Blackstone head of real estate Asia, Chris Heady, said the transaction underscored the group’s long-term commitment to investing in the Australian real estate market, but there is already talk that Blackstone could look to trade parts of the portfolio as it shoots to hit high return hurdles.

Australian landlords logged close to $14 billion in tax losses that were offset against their income in 2012, Tax Office data shows, according to The Australian Financial Review.

The amount claimed by 1.3 million landlords again brings the debate on negative gearing into the limelight as the Abbott government reportedly considers making changes to negative gearing-related legislation.

In all, $13.8bn in losses were claimed in 2011/12, $0.6bn higher than the previous year, while the average loss per property climbed to $10,894, the AFR reported.

The numbers show the hit taken to tax revenue from negative gearing and may renew a push to limit the tax benefit to new housing.

Step back and look at what is happening across our country. What you will see is not pretty.

The fall in the share prices of Woolworths and Wesfarmers (Coles and Bunnings) over the last few days is the first sign that the market realises that the dramatic events taking place in Canberra are going to hit already sluggish retail spending.

It’s the first whiff that the market understands what is about to take place.

Whether it is a tax levy on middle-income Australia, a cut in welfare or slashing government spending in particular areas, we are going to see measures that will reduce people’s spending power and/or create job uncertainty.

This squeeze on the economy comes just as we are about to lift shift allowances and penalty rates in retail as part of a decision made four years ago which cuts in on July 1 (Australia faces a humiliating retail calamity, November 12). That’s a very nasty retail combination -- higher wages and reduced demand. And what’s happening in retail will spread through the economy.

Right now this underlying problem is being masked by higher house prices -- not generated by real demand via first home buyers but driven by Chinese buying and by a lowering of bank credit standards to allow a big rise in investment house buying on the expectation of higher rents. If the clamps on the Chinese shadow banking system are to be continued for an extended period we are likely to see fallout in the Australian property market (China’s shadow banking squeeze could choke Australia, April 30).

The cocktail of higher retail wages, lower consumer spending, increased job insecurity, a lowering of bank credit standards to foster housing investors, and a Chinese shadow banking squeeze, is a dangerous combination if events. In normal circumstances there would be a further fall in Australian interest rates to boost consumer demand and lower the dollar. But the current low rates, fanned by lower lending standards, are driving money away from bank deposits into investment properties.

In previous tough times we have received a ‘get out of jail free card’ via higher commodity prices, but there is no joy in iron ore, coal or gas prices at the moment. Indeed the price of each of these key export materials is under pressure.

I don’t want to alarm readers but we have a situation where there are a series of decisions being made in government, housing, banking, wages and investment that are at odds with each other.

The government knows that it faces major employment problems with the end of the mining investment boom and the close of auto manufacturing, plus the switch from store-based retail to online retail. Its answer is massive investment in infrastructure. This will help but it takes time to ramp it up and it helps only part of the community.

I am not sure Tony Abbott and Joe Hockey fully understand what is ahead. We will know more when we see the budget.

Mirvac Group has reaffirmed its full-year operating earnings per share guidance as it unveiled an optimistic third-quarter update, buoyed by its residential business.

Mirvac said it expects operating EPS of between 11.8c and 12c per security in the full year, representing growth of between 8.3 per cent and 10.1 per cent.

Mirvac chief executive Susan Lloyd-Hurwitz said the group's focus on effective capital management initiatives, as well as accelerated progress on its non-core asset disposal program, will offer it the flexibility to plough capital back into the business and make future investments.

"Despite challenging market conditions our investment portfolio continues to perform well, with our in-house asset management and leasing teams delivering strong portfolio metrics," she said.

"Additionally, our development pipeline in both the office and retail sectors continues to progress well both in terms of construction and pre-leasing."

Mirvac said it maintained 97.6 per cent occupancy across its portfolio.

It also said it had exchanged contracts to sell a 50 per cent stake in 699 Bourke Street, Melbourne, for $73 million during the March quarter, and had entered into an agreement to sell a 50 per cent stake in 275 Kent Street, Sydney, for $435 million.

Capital city dwelling values rose at a slower pace in April, lifting 0.3 per cent after a 2.3 per cent month on month rise in March, according to the RP Data-Rismark April home value index results.

The result also follows a 3.5 per cent increase over the first quarter of the year.

Home values fell most in Canberra, where they lost 1.1 per cent, and also shed 0.5 per cent in Melbourne.

The strongest rise in house prices was in Adelaide, with a 2.1 per cent lift.

Sydney prices rose 0.5 per cent in the month, while Perth gained 0.2 per cent, Hobart added 0.2 per cent and Darwin lifted 1.1 per cent.

RP Data head of research Tim Lawless said the reduction in the rate of capital gains would be a welcome relief for first home buyers.

“A lower rate of capital gains in Sydney and Melbourne, where dwelling values surged 22.5 per cent and 16.4 per cent respectively over the current growth cycle, may now signal that these markets are moving through their growth cycle peak," Mr Lawless said.

"However, we will need to see a few more months of data before we can establish whether a slowing trend is now evident in these cities.

"We have recently seen auction clearance rates move lower in both of these markets."

The survey found Sydney's median house price has surpassed $800,000 for the first time on record.

Over the three months to April, the median house price in Sydney was $802,000, which RP Data said likely reflected the increase in activity at the more expensive end of the city's housing market.

Sydney's median house price is 30 per cent higher than Melbourne's and 68 per cent higher in Brisbane's.

Mirvac remains on the prowl for acquisitions after offloading seven properties to Blackstone and reaffirming guidance at its third quarter update.

The developer and fund manager expects earnings per share to grow by 8 per cent to 10 per cent during the 2014 financial year, which will translate into earnings per security of 11.8c to 12c.

Driving the growth is a pick-up in the company’s residential business despite mixed conditions, chief executive Susan Lloyd-Hurwitz said.

“Sydney and Melbourne continue to be the strongest markets nationally. In Sydney the housing market remains supported by limited stock and a continued sense of urgency for purchases, driving above-average price growth,” Ms Lloyd-Hurwitz said.

She added that Brisbane’s residential market had “turned the corner”, while Perth was also holding steady.

The relative strength of Mirvac’s residential portfolio was offset by some “challenging” leasing conditions in its office and retail portfolio.

This week Mirvac announced it had sold a 50 per cent stake in the Westpac building on Kent Street in Sydney for $435 million to Blackstone. Blackstone has also secured options over seven smaller office towers owned by Mirvac for $391.4m. Mirvac has provided vendor finance of $156m to Blackstone on an 8 per cent coupon to settle the Kent Street deal in July.

Ms Lloyd-Hurwitz said the company would look to acquire more development opportunities and passive assets.

Analyst opinion on the sale of the portfolio of properties to Blackstone was mixed.

Morningstar analyst Tony Sherlock questioned why Mirvac had sold the stake in Kent Street at a lower than expected premium.

Morgan Stanley analyst John Lee said Mirvac’s provision of vendor finance — or “Mirvacbank”, as he dubbed it — would help to lessen the sale’s dilutionary impact on Mirvac’s future earnings.

Mirvac’s shares yesterday closed up 1.5c to $1.765.

Private new home sales rose across the country in the March quarter and were particularly strong in Queensland, according to a survey from the Housing Industry Association.

New home sales increased by 5.8 per cent during the quarter, to be 23.4 per cent higher year-on-year, the HIA said.

Aggregated detached house sales lifted by 7 per cent, but multi-unit sales eased by 0.2 per cent, according to the association.

In the month of March, new home sales lifted by 0.2 per cent, the survey found.

In Queensland, detached house sales lifted by 20.2 per cent in the quarter.

Western Australia posted a 6.6 per cent rise in the quarter, while South Australia rose by 6.2 per cent, Victoria lifted by 5.6 per cent and NSW added 0.8 per cent.

HIA economist Diwa Hopkins said strong results occurred in the areas where a new housing recovery is just gaining traction.

"The original drivers of the recovery, NSW and WA, have maintained healthier levels of sales activity," Ms Hopkins said.

"This update shows there may be some potential for further growth in these states."

Building approvals fell in March, against expectations of an increase, official data shows.

The Australian Bureau of Statistics data showed the number of buildings approved fell a seasonally adjusted 3.5 per cent to 15,958 in the month.

That compares to an initially reported 16,669 approvals in February, seasonally adjusted.

Economists surveyed by Bloomberg had expected the figures to show a 1.5 per cent lift in approvals during the month.

Building approvals are now 20 per cent higher, seasonally adjusted, than in the same month last year, against expectations of a 31 per cent lift.

Total building approvals have declined in five of the past six months, driven by sharp falls in approvals for high density living. 

Housing strength to drive growth: economists

Commonwealth Bank senior economist Michael Workman said the housing construction sector looks ready to be the main driver the Australian economy when mining investment winds down.

"There is still a significant boost coming to construction and spending which will help offset the winding down of resources investment from its recent peak," he said.

"Non-residential construction approvals are also trending higher, thanks to strong interest in new CBD commercial developments."

Mr Workman said the strength in housing will help employment growth and flow into other sectors of the economy.

"We expect to see sharp rises in the construction activity data in coming quarters," he said.

"It should also flow into higher spending at big box retailers as the new dwellings are kitted out."

JP Morgan economist Tom Kennedy said the weakness in the home building approvals is almost entirely attributable to a larger than expected decline in the volatile high density approvals.

"Detached dwelling approvals were more encouraging, with the number of approvals stabilising at elevated levels and consolidating the gains made earlier in the quarter," he said.

"High density approvals have been a consistent drag on the headline data in recent months."

Approvals for private sector houses fell 0.7 per cent in the month, and the 'other dwellings' category, which includes apartment blocks and townhouses, was down seven per cent, the seasonally adjusted figures from the Australian Bureau of Statistics showed.

Housing Industry Association chief economist Harley Dale said home building will be a major boost for the economy in 2014.

"If you're searching for highlights to the Australian economy, new housing is the best shot you can take, he said.

"The momentum in approvals has slowly shifted from multi-units to detached houses and that is evident in the March quarter results," he said.

"That having been said, multi-unit approvals hit a record high in the December quarter last year.

"How many of these approvals are converted into dwelling commencements and over what timeframe will exert a considerable influence over wider domestic economic activity."

The Paul Sadleir-led West Australian residential developer Cedar Woods is tapping the market to fund an acquisition of a $68 million site in Brisbane.

Cedar Woods launched a $30m capital raising yesterday through Euroz Securities, RBS Morgans and Blackswan Equities.

The developer’s raising comes after another bumper half-year result in February that led the company to predict a record net profit of about $40m for the full-year.

Cedar Woods will use the fresh capital to acquire a 227ha plot of land in Upper Kedron, 13km west of Brisbane.

It plans to pay for the site across a four-year period with $19m to be paid this month, with a further $10m handed over in May next year.

Cedar Woods will also draw down a further $39m of debt to fund the acquisition in a final payment to be processed in 2018.

The land is expected to yield 1000 lots with an end value of $400m.

Upper Kedron, located next to the popular suburb of The Gap, will be developed across a 10-year period beginning from next year.

The acquisition marks Cedar Wood’s first foray into the southeast Queensland market.

Ahead of the acquisition, it boasted residential developments in Western Australia and Victoria, including its flagship project at Williams Landing in Melbourne’s West.

An investor briefing on the capital raising said the Upper Kedron acquisition “offers a number of similarities” with the Williams Landing project.

According to the briefing document, the Upper Kedron site is the last major housing development site in Brisbane City, with most other sites available for purchase located more than 25km from the Brisbane CBD.

Cedar Woods was long thought to be a potential suitor for its smaller rival, Villa World, though it is understood that despite the companies’ effort no deal was sealed.

Last year, Mr Sadleir, Cedar Woods’ managing director, flagged the company’s entry into the Queensland market saying the company was having a “quiet look” at site acquisitions across the southeast corner of the state.

Yesterday’s raising consists of a $25m institutional bookbuild and a $5m share purchase plan.

The placement of 3.68 million shares for $6.80 represented a 3 per cent discount to the last trading price of $7.01. Its shares will remain in a trading halt until tomorrow when the bookbuild is completed.

Charter Hall has expanded its Bunnings Partnership Fund with the acquisition of a $127 million portfolio of the hardware brand's stores.

Charter Hall said the off-market portfolio acquisition brings its total Bunnings assets under management to $400m and total retail assets under management to $3.2 billion.

The group said the transaction reflects a range of initial yields from 6.95 per cent to 7.5 per cent.

"The Bunnings Partnership Fund 2 portfolio comprises approximately 50 per cent (by value) of metropolitan located stores in the Perth suburb of Armadale and the Gold Coast suburb of Burleigh Heads, with the balance regionally located Bunnings stores at Gympie and Mackay in Queensland," the group said.

All properties are leased to Bunnings on new 12 year leases and provide average 3 per cent per annum rental increases.

Westfield Group has rejigged its proposal for the restructure of its $70bn empire so that the deal is more in favour of investors in its Australian sister trust Westfield Retail, as flagged earlier by Data Room.

Under the plan, announced to the ASX, Investors in Westfield Retail Trust will receive around an extra $300m of the entity to be created from the merger of that stock with the Australian and New Zealand business.

Westfield Group chairman Frank Lowy said the group has met with key investors in both WDC and WRT over the planned restructuring along geographic lines.

"In response to some concenrs raised and in consultation with the independent directors of WRT, WDC has decided to improve the merger terms for WRT security holders," Lowy said.

The adjustment will be achieved by reducing the net debt of Westfield's business contributed to the Retail Trust from $7.1bn to $6.8bn.

DataRoom understands that at least two key investors in Westfield Retail who were planning to vote against the deal believe the rejigged proposal will be enough to get the deal over the line.

The independent expert Grant Samuel & Associates has confirmed that the adjusted proposal was in the best interests of WDC securityholders.

The announcement will allow Westfield to reissue scheme documents without changing the date of its meeting for an investor vote on May 29.