Chinese investment doubles Down Under

Chinese investment in Australian real estate has doubled, as buyer appetites show no sign of letting up.

China has increasingly been snapping up properties in Australia, much to the concern of those unable to afford the country’s previously soaring house prices and officials worried about illegal investment in the housing market. Indeed, foreign investment comes with a string of restrictions in Australia, with non-resident buyers allowed to purchase new build homes, but only permitted to purchase existing homes under certain conditions.

All investment from non-residents (excluding Australian citizens living abroad and visa holders) must be approved by the Foreign Investment Review Board (FIRB) before proceeding.

Last year, the government also announced a crackdown on illegal purchases of real estate, introducing penalty fees and other charges.

Despite the tighter regulations, though, Chinese demand continues to grow: Chinese buyers invested $24.3 billion in the 2014-2015 financial year, more than three times the $7.1 billion spent by American buyers and six times the $3.8 billion spent by Singaporean buyers. Investors from Malaysia ($3.4 billion) and South Korea ($2.5 billion) complete the top five.

The value of proposed investment from all overseas buyers has surged by more than 75 per cent, reveals the FIRB’s latest annual report, from $34.7 billion to $60.8 billion. In 2013-14, China intended to invest $12.4 billion in the country’s real estate, with last year’s investment doubling that figure.

“We expect Chinese investment overseas to more than double or triple by 2020, and that is not just in Australia – we mean globally,” a spokesperson for Chinese property portal Juwai.com tells Domain.com.au.

“So we are not surprised at all by the trend, and we expect it to continue.”

Esther Yong, director of portal ACProperty, suggests that, if anything, the tougher market rules may actually boost Chinese confidence in Australia’s property even further, because Chinese buyers are more cautious about investing in countries with a lack of regulations.

Chinese demand for Australian property to stay strong

26th January 2016
Sydney Harbour Photo: Wikimedia Commons

Chinese demand for Australian real estate is forecast to stay strong this year, despite cooling price growth and a crackdown on foreign investment.

A report by the National Australia Bank showed that in the three months to October 2015, 1 in 5 of all new apartment sales (and 14.9 per cent of all new house sales) went to overseas buyers. Chinese buyers have become major drivers of investment activity, as the country’s economic outlook has encouraged investors to look for stability overseas and the weak Australian dollar has boosted spending power of foreign buyers.

Concerns, though, have arisen about illegal foreign investment in the country’s real estate, as Australia house prices have raced higher in recent years, thanks to low supply.

As a result, new measures were introduced late last year to regulate overseas investment more closely, with foreigners purchasing property illegally facing fines of around US$100,000 and up to three years in jail, and companies subject to even more sever fines. Estate agents who knowingly assist an investor breach the rules will also be fined up to US$33,254.

Other restrictions remain the same for foreign investors, with existing homes not allowed to be purchased (only new builds) and all investment subject to approval from the country’s Foreign Investment Review Board.

The market, meanwhile, is forecast to cool, with house price growth slowing from the 12.8 per cent annual price rise recorded in Sydney by CoreLogic RP Data in December.

Tim Lawless, head of CoreLogic’s research team, said auction clearance rates had “found a new floor”, with auction sales in the capital city at just 50 per cent.

“With conditions softening during the normally active spring season and over the first month of summer, the outlook for the housing market in 2016 is looking less positive than the strong growth conditions seen through the first three quarters of 2015,” he commented.

However, Monika Tu, an agent who specialises in the sale of luxury homes, says that Chinese appetite remains strong.

“First it was for education but now the clean environment has become top priority,” Ms Tu, who runs the agency Black Diamondz, told The Australian.

Tu has sold more than $200 million worth of property in the past nine months.

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