MELBOURNE: Australia's retail sector is attracting interest from luxury brands as they look toward the country as a natural next step to their Asia presence.

Melbourne – renowned for its edgy fashion and design culture – is leading the charge for luxury brand launches. Considered Australia's 'capital of fashion', the city will become the newest retail hotspot for an estimated 18 luxury brands in the next 12 months, according to the Australian Financial Review.

The popularity of Australia as a new luxury market is driven in part by the changing shopping patterns of Chinese travellers, as new 'anti-extravagance legislation' in China has led to many preferring to make their purchases overseas, where prices for luxury products are far more attractive. An estimated 70% of Chinese luxury spend is now outside of China.

China's tourism market is worth A$7.7bn to the Australian economy, and they love to shop – Chinese tourists spend more than any other nationality while on holiday.

This trend, alongside Australia's buoyant retail sector, makes the country an attractive new market for luxury brands.

Fashion brands are leading the charge, with designer labels such as Moncler, Agent Provocateur, Miu Miu, Carolina Herrera, Rag & Bone, Cole Haan and Missoni all on the hunt for premium retail space in Melbourne.

Outside of Melbourne, fast fashion outlets including Zara, H&M and Forever 21 are looking to expand their Australian presence with stores in Sydney and Brisbane's suburban shopping centres.

Though the number of international brands setting up shop in Australia has grown significantly in the last three years, market penetration for luxury products remains remarkably low. Australia will need about 50 more international brands to reach the level of regional retail hubs Singapore or Hong Kong.

The influx of brands does have a downside: the cost of retail space in downtown Melbourne has soared 30% and there are no vacancies at the iconic Collins Street shopping precinct, forcing brands to look elsewhere.

Data sourced from Australian Financial Review, SBS News; additional content by Warc staff