Thursday 23 November 2017

Wealthy Chinese investors' effect on the Australian property market

According to a report in the Wall Street Journal, cash-rich Chinese investors are now among the biggest buyers of real estate in Australia, snapping-up properties ranging from modest suburban homes to waterfront mansions with views across Sydney Harbour.

Wealthy Chinese investors' effect on the Australian property market

Port Piper in Sydney. A favoured investment destination for wealthy Chinese investors.

July 10, 2013

In one of the biggest purchases so far in 2013, a Chinese buyer paid more than A$50 million (US$46 million) for a house in Port Piper. Weeks earlier another house in the same area sold to a Chinese buyer for more than A$30 million.


The extent to which Chinese money is skewing the Australian real estate market became apparent to economists at Citigroup as they worked on the bank’s predictions for house prices.


The economists found a strong correlation between levels of Chinese migration which was echoed, three years later, by changes in property prices.


Citigroup has worked Chinese migration figures into its future equations although it didn't find a similar relationship between total immigration and property prices.


Quoted in the report, Paul Brennan chief economist of Citigroup's Australian operations said: "It could be that Chinese immigrants have the income capacity and desire to buy property, more so than other nationalities."


In the financial year ending June 2011 immigrants from China to Australia were the most numerous although their numbers fell behind arrivals from New Zealand and India in 2012.


Analysts and property agents have pointed-out several factors that should keep Chinese interest in Australian real estate strong.


Firstly, cooling measures to reduce property speculation in China and Hong Kong have caused buyers to look elsewhere for investment opportunities.

According to Cushman & Wakefield, government cooling measures in Hong Kong reduced property investment by 34.2% quarter-on-quarter in Q1 2013

Australian schools are also drawing a lot of children of wealthy Chinese business people who are buying property either for their offspring or for themselves.


The fall of the Australian Dollar – by 10% over the US Dollar in the past two months – has also made Australian property even more affordable for overseas investors.

 

Although Australia restricts the type of property that can be owned by foreigners, and non- residents can't buy an existing home, anyone can buy and keep a home under construction or buy a vacant lot and build a home.


According to Australia's Foreign Investment Review Board, China accounted for A$4.19 billion, or 7%, of the A$58.40 billion of foreign investment in commercial and residential real estate in Australia in the year ended 30th June 2013.

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