How do Chinese house hunters impact the market?
January 29, 2015 / Written by Rich Harvey
While there are many known factors that impact the market, like dwelling approvals or property investment lending figures, one influence that is harder to gauge is the impact of foreign investment. As was noted by Cameron Kusher of CoreLogic RP Data last year, the House of Representatives Standing Committee on Economics acknowledged there was no accurate tracking of foreign investment in Australian property.
The committee also recommended penalties for those who skirted the Foreign Investment Review Board protocols. But as Mr Kusher points out, this is not necessarily a bad thing if you are a foreign investor. Boosting transparency is a great confidence booster for all involved.
But this still leaves the question: How is Chinese investment affecting our local markets?
How much has China invested here?
Upon the announcement of the China Australia Free Trade Agreement (CHAFTA), the Australia China Business Council relayed some great ABS data on our relationship. Australia has invested $29.58 billion in Chinese stock, while they have invested $31.9 billion in stock here. So, the playing field is fairly evenly balanced for overall mutual expenditure.
According to The Australian, the Foreign Investment Review Board (FIRB) also has China recorded as the single largest offshore source of Australian property investment in 2012-2013, with $5.9 billion spent that year - a 40 per cent increase on 2012.
While there is no data for 2013-2014, it is worth noting that the FIRB permits non-resident investors to only buy new properties. The latest data from the ABS shows a 5.7 per cent increase in new private dwellings across Australia between November 2013 and November 2014, so it stands to reason that the level of residential property investment in Australia from China has only increased through the last 12 months.
What does Chinese investment mean?
While some people might be worried about Chinese investment pushing them out of the market, I think this is not a huge concern. While Chinese investors are looking for the same sort of things that house hunters here are - wealth growth, great lifestyle - they tend to buy in the higher end of the market. Anyone looking for real estate below the luxury homes end of the market may not even notice the impacts.
Despite this, there will always be stiff competition - especially when you are entering the Sydney residential market. To get the edge on your competitors, whether they are from Blacktown or Beijing, get the expertise of a buyers agent on your side. They can find the great properties, the affordable properties, and the right properties to provide you with positive cashflow into the future.