It seems China’s thirst for Australian real estate extends well beyond residential, with ABC’s The Business last night reporting on the huge CBD buying spree taking place across Sydney and Melbourne, where more than $5 billion has been invested in the last year alone.
According to CBRE research, in just three years, Chinese capital flowing into global real estate has tripled, with 25% of that increase investment into Australia:
The sharp rise in investment, along with the soaring prices paid for some CBD commercial properties, has provoked warnings of a potential property collapse in the event that the Chinese investment dries up. These concerns were backed-up by the RBA’s head of financial stability, Luci Ellis, who on Tuesday noted that commercial property had previously played the primary role in property busts and financial stability risks.
According to LFE economics’ Phil Soos, it was a commercial property bubble that caused the 1990s recession:
“During the late 1980s, another commercial bubble developed, centred in Melbourne, Sydney and Perth. After peaking in 1989, commercial real estate prices collapsed by 60% through to 1993, a thorough blood-letting. This produced the early 1990s recession…”
Of course, the bigger worry this time around is residential property, which is playing the primary bubble role, with commercial taking a back seat.
