Government policies in both Australia and China are eroding Chinese buyer demand for local real estate, says Michael Pallier, managing director of Sydney Sotheby's International Realty.
Government policies in both Australia and China are contributing to softening Chinese demand for local real estate, says Michael Pallier, managing director of Sydney Sotheby's International Realty.
The Chinese government is making it harder to get money out of China, Pallier told SCHWARTZWILLIAMS, and new fees on foreign buyers in New South Wales are making it more expensive for Chinese people to buy real estate in Sydney, he said.
"Chinese people still want to buy here," he said, but government policies are making it harder.
"The reason Chinese people want to buy real estate in Australia is because they want to educate their children here," he said.
The trend is being borne out by recent data.
Cushman & Wakefield's recent report 'China Outbound Investment' claims that Chinese outbound investment in global real estate fell 51 per cent year on year in the third quarter of 2017, to US$2.5 billion, the lowest total in 14 quarters.
And in a speech titled 'Australian Property – Financial Stability and Foreign Involvement' this week, Jonathan Kearns, the head of financial stability at the Reserve Bank, said, "Purchases of new properties by foreign buyers have eased over the past year," "reportedly because of stricter enforcement of Chinese capital controls and tighter access to finance for foreign buyers."
Kearns said that "purchases by foreign buyers (in Australia) are equivalent to around 10-15 per cent of new construction, or about 5 per cent of total housing sales." The proportion is higher for apartments, said Kearns, and most of the sales are in Sydney and Melbourne. Around three-quarters of the foreign buyers are from China, said Kearns in his speech.
Chinese investment in Australian real estate likely boosts supply
Kearns said that purchases by foreign buyers are likely to contribute to the expansion of housing stock in Sydney and Melbourne, rather than remove supply.
"The strength of the Australian property market, and the participation by foreign buyers, has enticed some foreign developers to Australia for specific projects," said Kearns.
The increased purchasing of property by foreign buyers for investment purposes is a relatively recent phenomenon, said Kearns, and its "impact on the housing cycle is less clear".
This article was first published in The Real Estate Conversation.
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