Chinese buyer demand for Australian property by might be down from the boom period of the last two years but by no means will it taper off, according to Jon Ellis, CEO of Investorist.
Mr Ellis, CEO of Investorist, says that buyer demand from Chinese investors is down in 2017, but needs to be seen in context.
“Yes the market has cooled, but we are seeing similar levels to 2014 and 2015,” Mr Ellis said.
“And the sheer size of the Chinese market, with population of 1.4 billion, increasing wealth, the world’s second biggest economy, means this still represents a substantial number of investors.
The view that Chinese demand for Australian property has ‘stopped in its tracks’ as many media quotes suggest, is simply not accurate.”
Jane Lu, Head of Australia for Juwai.com, the No. 1 Chinese international property website, echoes this sentiment.
“We expect 2017 to be one of the two or three biggest years yet on record for Chinese international real estate acquisitions. Investment levels will be down from 2016, which is the all-time peak to-date, but more or less on par with 2015.
“Australia is the second most popular country in the world with Chinese buyers, after the United States and before Thailand. The latest Foreign Investment Review Board report found that Chinese buyers had been approved to invest $32 billion in Australian real estate.”
Data from Juwai.com reveals Melbourne is the most popular city for Chinese buyers. Melbourne takes four in every 10 buyer inquiries from Chinese buyers.
“In 2017, Melbourne has stolen Chinese buyers from other locations,” Ms Lu said.
“Last year, Melbourne only received 36% of Chinese buyer enquires made in this country. This year-to-date, it has received 41% of Chinese buying inquiries.
“Melbourne is actually receiving more buyer inquiries now than it was one year ago. In the first half, Melbourne received 13.3% more buyer inquiries than it did in the first half last year. That’s even faster than the global rate of growth of 8.7%.
“There is no lack of Chinese demand. Despite tighter capital controls, 57% of Chinese investors told Financial Times researches that they will increase their overseas investments over the next two years, with more than 60% planning to invest specifically in residential real estate. Chinese investors’ top goals are risk diversification and their children’s education. These push factors provide an underlying strength to demand in Melbourne.
Mr Ellis said their portal is still seeing a third of the interest being directed to Australian property. This is down from around 40 per cent previously, demonstrating a small decrease in interest.
Despite this drop, Mr Ellis says Chinese buyers are genuinely interested in Australian property and have a significant wealth pool they can draw on and typically invest in high-end property.
“Most of these Chinese buyers are international style people. They travel regularly, have family offshore and have interest in acquiring property offshore. They will typically have an offshore bank account before they look at investing in property in Australia.”
Mr Ellis suggests that trends and regulatory controls also play a big part in influencing where Chinese people decide to invest in real estate.
“Normally property developers expect five per cent perceived settlement risk. But when capital controls changed and banking in Australia changed, we saw that get up to 15 per cent or higher. It made a significant impact,” said Mr Ellis
Juwai.com’s Jane Lu says for the real estate markets, China’s loosening of the capital controls shows that capital controls could be further unwound in the near future. That would potentially lead to increased Chinese investment in overseas property.
“It is probably wise to look at this new loosening of capital controls as an experiment. If it goes well, then you can expect China to further unwind capital controls in future months.”
