China Invests Big in Queensland Property.
Our website traffic grows every month–which you’d expect to be normal with in business.
But what has surprised me over the last year is that a growing number of visitors to our website have been from China.
It wasn’t so long ago that a Chinese visitor would be rare. If they wanted to buy property in Australia they’d always go through one of the Chinese agencies. Whilst that is still largely true, it’s no longer the case. The Chinese have a ravenous appetite for Australian property.
20% of all new properties in Sydney were sold to Chinese investors this year. Yes, 20%.
Global investment bank Credit Suisse expects Chinese nationals to sink around $44 billion into Australian residential real estate over the next seven years. Given the restriction on non-permanent residents forcing them to buy newly built properties, Credit Suisse estimates that Chinese buyers are currently purchasing around 12% of new homes in Australia.
Which begs the question:
Why Is China Buying Australian Property?
There’re a few main reasons:
- The biggest influence has probably been that Canada’s government made an abrupt decision that has had repercussions for Australia’s already overvalued residential property market. Canadian Finance Minister Jim Flaherty on February 11 announced that a 28-year-old visa scheme designed to attract wealthy foreigners to the country would be axed effective immediately. Under the now defunct Immigrant Investor Program, as long as you had $C1.6 million in net assets, then all you needed to do was lend the Canadian government $C800,000 for five years on an interest-free basis and you were assured permanent residency for you and your family and a fast-track to citizenship. Remember, Canada has similar resources and growth like Australia.
- China’s been going through a massive property boom themselves, one which made ours look meek in comparison. According to a recent investment bank report, the wealtiest 1% of Chinese households is estimated to own about 33% of residential property. These investors are looking further afield, like Australia, for opportunities. And since Canada is no longer an opportunity…
- Australia has always placed more emphasis on property and property values than the average country. The State is quite happy with you paying as much stamp duty as possible to finance them. The market is largely propped up by investors, via bolstered encouragement from the government in the form of schemes like negative gearing. A collapse in Australian property prices can destabilise the whole economy probably more than any other country on earth. Australia can not afford for property prices to collapse. China likes the safety net that provides, coupled with the fact that mineral and resource rich countries are leading the world, economically, and this flows on into capital growth in property.
Why Chinese Property Buyers Can Hurt You
The record high prices have triggered concerns the market may be headed for a bubble.
Australian workers’ incomes aren’t keeping up with the rise which leaves the market open for a rising number of wealthy overseas investors. According to the Credit Suisse report, Chinese buyers are currently pouring more than five billion dollars a year into Australia’s residential market.
A recent study by property research group Knight Frank, places Australia fifth among the world’s most overpriced housing markets.
The dream of buying an owning property is falling more and more into the domain of the wealthy. The Australian dream of owning your own home becomes harder each year for more and more people. More and more will be forced to rent until we see a change in the market.
The first-home buyers have dried up. A few years ago people were purchasing property from us with a mortgage. Nowadays, the largest segment we deal with are cash buyers.
The market has also changed. With the wealthier being more financially literate and savvy, we’re being asked more and more to act more like a home buyers’ agent, being given a brief and asked to track down property to purchase which isn’t listed on the market.
What you see listed on the market today has already been turned down by a dozen people before it even hits the internet.
The world is changing. Fast.