Two articles in today’s AFR draw compelling arguments supporting efforts by regulators in both countries to slow Chinese investment in Australian property.
Chinese buyers, who make up about 80 per cent of all foreign property purchases in Australia, have grown wary after being hit by Beijing's tightened capital controls, local banks restricting lending and growing fears of an over-supply in the capital city apartment market.
The drop-off in Chinese demand for Australian property marks a noticeable shift from just a year ago when buyers from the mainland were seen to be dominating apartment purchases in many inner city suburbs.
"It was just 12 months ago that Australia was the hottest thing at Chinese property exhibitions," said Scott Kirchner, a Shanghai-based director of Beller Group, a real estate agency.
"Now Australian developers are not up here pushing projects and Chinese agents have no appetite for Australian property."
That downbeat assessment is mirrored by figures released from Chinese-language property portal Juwai.com, which showed searches on Australian property were down one-third in the first half of the year, compared to the second half of last year.
Worse still is a view held by Dr. Nellie Liang, former director of the US Fed’s Office of Financial Stability who was recently quoted as saying “Twenty per cent moves in house prices isn’t crazy anymore”
Dr Liang, who recently visited Sydney and shared her thoughts on financial stability research with the Reserve Bank of Australia, told the AFR; policymakers were right to be "really concerned" about high house prices and household debt that was elevated by international standards.
Amid signs that Chinese businesses and people are being forced to move offshore money back home, e.g. , China's Wanda Group, under pressure from Beijing to crimp its offshore expansion and reduce debt, last week confirmed it was selling majority stakes in its Sydney apartments and hotel development and Gold Coast apartments project, Liang said a "trigger" for a real estate price collapse could be a reversal in international capital flows.
While I don’t necessarily share Dr. Liang’s views on such a property correction I am buoyed such moves by Chinese to restrict or exit the Australian property market will deliver more affordable outcomes for Australian buyers, especially First Home buyers who have consistently been outbid by foreign investors who saw Australia as a safe haven and entrée to resident visa’s.
Courtesy John Kehoe, Angus Grigg and Lisa Murray – Australian Financial Review (AFR)