Credit Suisse: Chinese property demand to soar

Here’s a report to make you projectile vomit. From Credit Suisse:

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An appetite for Aussie property: The Chinese are currently purchasing more than $5bn of Australian residential property per annum. This accounts for 12% of new housing supply. They are concentrating their buying and acquiring 18% of new supply in Sydney and 14% in Melbourne. While Australia has some of the most unaffordable housing in the world, further strong Chinese demand can push prices even higher.

  • China is getting richer: There are currently 1.1mn Chinese that can easily afford to buy an apartment in Sydney. We estimate the number will rise by 30% by 2020. This should support a further $44bn of Australian residential property purchases over the next seven years. They purchased $24bn over the past seven. As long as Australia remains open for business, our companies should also benefit from the next stage China’s economic development.
  • Stocks: Stocks that should continue to gain from this longer-term theme include the developers, building material companies, property websites and banks. We don’t discount the possibility of a Chinese entity taking over one of these companies. Our portfolio is already long Mirvac, CSR and National Australia Bank; we now add Fairfax

CS sees four paths for the foreign investor:

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First, a Chinese citizen, who resides outside of Australia or is a temporary resident in Australia, buys a new dwelling. Often this purchase is off-the-plan. She, or the developer of the property, needs FIRB approval of the purchase/sale. There is no limit to the number of new dwellings that she can buy and we know that Aussie banks are happy lending to these buyers. They generally apply a loan to valuation cap of 80% to foreign residents and apply a 25% reduction to income when assessing the potential size of the loan.

Second, a Chinese citizen who resides in Australia on a temporary basis buys an established house to live in. Current rules allow for only one dwelling to be purchased. This is where we can capture the activity of the Significant Investor Visa (SIV) holders. The SIV was introduced in 2012 and allows high-net-worth individuals, and their families, to temporarily reside in Australia as long as they commit $5mn to approved Australian assets.

This amount does not include their house. They can become permanent residents after four years or extend their temporary status. There have been 65 SIVs granted in 2013, 59 of which have been to Chinese citizens.

Third, a Chinese citizen, who resides outside of Australia or is a temporary resident, buys residential property for redevelopment. This buyer needs to ask the FIRB for approval which is usually provided as long as she will increase the Australian housing stock. The development should be at least two new dwellings for each one she is acquiring. Our discussions with real estate agents dealing on behalf of the Chinese suggest many of the smaller projects are done with little or no debt. Developers are looking for an asset to provide a positive real return and escape the repression of negative real yields in Chinese deposits.

Fourth, a recent Chinese settler in Australia can buy property for investment or residential purposes. This buyer does not need approval to buy property as he is a permanent resident. To estimate this source of flows we employed data from the Australian Department of Immigration (ADI). In 2012–13 financial year there were 152,000 people permanently settling in Australia and almost 20 thousand (13%) were from either China or Hong Kong (Figure 4). Three-quarters of these immigrants settled in either NSW or Victoria and the ADI notes that most were in the capital cities of Sydney and MelbourneIn Figure 6 we illustrate the demand for Australian property.

In addition to these observable flows, there are others we cannot accurately measure. For example, if a Chinese resident uses an Australian-based family member, friend or solicitor to buy property with their own money. Or when an Australian citizen sells her apartment in Shanghai and switches into a Melbourne Docklands flat. While this is still money entering Australia from China, we are not able to measure it. For this reason, we believe our calculations may understate the potential Chinese flows into Aussie property.

And the future, according to CS:

Australia has one of the most expensive property markets in the world…We forecast Chinese buying power will increase as the economy develops and the  population becomes wealthier. They purchased $24bn of Australian housing over the past  seven years; we forecast they will purchase $44bn over the next seven, to 2020.

To be clear, I have no problem with any kind of investment in new stock by anyone from anywhere. But I cannot believe that we will sell out our youth like this in existing housing. I am a reasonable human being and more committed to markets than most but this makes my blood boil. I’m sure the mainstream view is similar, thus anyone betting on the continuation of the disgraceful policy settings that allow this will likely face a political reality check long before the figures projected by CS ever become a reality. I, for one, will being putting my energy into ensuring so.

Comments

  1. I used to think the derogatory term ‘poor white trash of Asia’ was intended to describe the country.
    Now I understand that what it means is that white Australians, who by and large, in their own country will be the ‘poor’.
    Thanks Laberals, keep up the good work.
    Protect speculators, foreigners, the banks, your own portfolios.
    Hang the rest of the country on a firesale flagpole.
    Here is a cost cutting idea – disband the ADF before they twig to what is going on.

    • I wouldn’t be too worried. In some Asian countries like Vietnam, they had a massive property boom, hundreds of thousands of overseas investors flocked to buy like the likes the country had never seen. Then the big “crash” came. There’s never been a major property crash in Australia, but then again, we’ve never had this sort of demand since the founding of Australia. Globalisation has changed everything and will continue to change. When this causes social chaos 5-10yrs down the track, our leaders will realize the damage and I suspect there will be a major changes to foreign purchases.

      • With respect … we have not had a property crash in living memory. 1880’s crash was epic When Melbourne led the world!

        From Wiki:

        “In the 1880s the long boom culminated in a frenzy of speculation and rapid inflation of land prices known as the Land Boom. Governments shared in the wealth and ploughed money into urban infrastructure, particularly railways. Huge fortunes were built on speculation, and Victorian business and politics became notorious for corruption. English banks lent freely to colonial speculators, adding to the mountain of debt on which the boom was built.

        1891 economic bustEdit
        In 1891 the inevitable happened: a spectacular crash brought the boom to an abrupt end. Banks and other businesses failed in large numbers, thousands of shareholders lost their money, tens of thousands of workers were put out of work. Although there are no reliable statistics, there was probably 20 percent unemployment in Melbourne throughout the 1890s.

        Melbourne had 490,000 people in 1890, and this figure scarcely changed for the next 15 years as a result of the crash and subsequent long slump.”

        http://en.m.wikipedia.org/wiki/History_of_Melbourne

        History always repeats. So say SplitEnz!

    • Funny you mention this…

      A friend of mine was only this past weekend chatting to me about the stress he is under from his wife to buy and that this is causing them to fight all the time.

      He is firmly in the ‘Don’t Buy Now’ camp as am I, although he seemed visibly emotional with regards to how it was affecting his home life / relationship. Understandably so… 🙁

      Now here comes the pinch! He is a keen hunter and then went on to say that if his relationship ends due to this insanity continuing then he (sic) is going to do something about it. And yes, he hinted at projectiles being used…

      I cannot believe for one minute that he is alone in his thoughts….Very sad, but true.

      • Yes. It is seeing the evidence, everywhere, of the multivarious forms of suffering — and, the very real dangers of where that suffering can easily lead — that incentivises my continued bleating about the root cause of it all (usury).

  2. As someone who can’t afford to buy in either of their hometowns – Sydney and London – in part due to the role of foreigners in those ‘markets’, I have a vested interest in seeing this change. And I do believe it will – there is a lot of resistance coming out of London, Paris and Canada on this and we will probably follow (most likely after we crash).

    BUT can we please focus on what we should DO rather than demonising the Chinese.

    This is not a criticism H & H, I see you have put in your warning too. I’m just adding to the sentiment before some of the more strident ‘patriots’ get going.

    • DingwallMEMBER

      What are the odds our government introduces a tax on foreign purchases to fill coffers and re-direct moneys to grow exciting new Australian industries………….. three years after the foreign purchases have slowed to a trickle

    • You keep on saying this.

      Please tell us exactly WHERE they have been demonised ?

      Seriously its infuriating having to read you accuse everyone of being racists and hating the Chinese for our own policy flaws, yet, no where has anyone cast any slurs on the Chinese.

      now Andrew Bolt and many other far right LNP astro-turfrs have also been screaming about how anyone not wanting to sell off Qantas is also a racist, why shouldn’t Arabs own our national airline, and our ports, and anything else. It’s just racism.

      Pretty damned sure that’s what’s coming from you – unless of course you can point to the virulent racism on this page you are referring to.

      • Racism , when it is racism, is fairly self-evident and abhorrent. The term gets used way too much these days to stifle debate and shame people into withholding often reasonable viewpoints.

        Another perspective that doesn’t seem to come into the equation is the attitudes of other ethnic groups to so-called white Australians. They are equally as capable of racist attitudes, and in some areas they no longer suffer the relative disadvantage of small numbers.

      • I’m with you, Leviathan. I haven’t seen any racism, but I have seen resentment towards foreign buyers. We all realise our stupid government is to blame for their treasonous policies,but surely, one can be excused for feeling already beaten when they see the crazy prices properties are going for.

        It’s not only the foreign investors, but the fact that they have open slather on Australian properties is a big contributing factor. Of course there are other factors too, like low interest rates, negative gearing, SMSFs, massive immigration, and generally the decision that people make when buying a property – that they are going to have to become mortgage slaves for many years.

        But I think what people fear is that there are just so many Chinese in particular who can afford to outbid Australians. The numbers are just huge, and it’s like a giant tsunami coming to swallow us whole. We know that a lot of them have made their money illegally and through corruption, so it’s not an even playing field. And what makes it so depressing is that our own government is encouraging this, and is so eager for foreigners to invest here that they have absolutely no problem in selling out Australians who are priced out of the market.

        So is it any wonder that when would-be homebuyers see Asians at an auction they already feel defeated?

      • MB’s posts are not racist but the more people become frustrated with the housing situation and while they fail to protest against the real culprits, the resentment will slowly turn into racism. People will end up blaming the foreigner (namely Asians) instead of blaming themselves for letting this happen.

        Even though MB is not racist at all; I’ve no doubt that flawed individuals will read the information presented by MB to fuel their racism and annoyance towards Asians/”the foreigners”.

    • This isn’t a new phenomenon, Felix! I bought a new-build in SW4 in ’94 ( a St George Development), and was assured that I’d better ‘get in quick’ because the marketing Boys were off to Hong Kong on Monday. In ’07 in Christchurch (NZ) the new subdivision of Northwood had organised busloads of Chinese buyers being specifically escorted around the properties for sale. It’s not racism. It’s economics. Economics that we, as you say, have allowed to be visited upon us and our society.

    • @ Felix Frost,

      Try working in an industry where you are dealing with these Chinese property speculators on a daily basis and you will soon see some of the derogatory comments are indeed well founded.

      I have never been one to paint an entire people with the same brush, but the clients I deal with and have dealt with on a daily basis for many years now certainly live up to the stereotype that others have alluded to.

      Its seems to me that the cotton wool brigade need to harden up.

      • “Schadenfreude”, would you be able to elaborate please, I am curious as to the incidents you refer to ?

    • You should go read some Hong Kong vs Mainlander commentary for an insightful experience.

  3. I wonder if they looked at the potential of investors targeting Canada switching over to Oz. Well, our negatively geared leaders and RBA will stop at nothing to ensure this keeps going on. Our well-being in this matter means absolutely crap all to them. I know how investment mentality works. I’ve been in the situation where I hoped for something bad to happen, or was happy when something did just because my investment was doing well because of it. That was just play money so I can only imagine if it was millions invested for my retirement. Plus they can engineer policies to juice their investments!

    The only hope is that this prediction comes sooner and Australia’s disposable income craters leaving no choice but to reform.

    On another note, I don’t really see how foreigners buying investment properties in Australia is a good thing. I understand investment in productive things like businesses, but I don’t see how it benefits anyone here to sell off such a large chunk of our shelter. Especially if the hearsay of these investors keeping their houses empty is true.

    Of course, this would all go away if supply was relaxed, land tax replaced stamp duty and negative gearing was canned.

    • I own a house and I hope this is reversed pronto. You’re overly cynical. It can be changed if pollies are made to fear the consequences of the status quo.

      • Do you own a house or a house + investment properties? I don’t know if I’m being cynical since both Abbott, Hockey and the RBA all support higher house prices. They are doing nothing but making things worse too. NZ on the other hand, admitted that they are bubbly and took steps now, late but better than never. Not sure if their leaders own properties.

        Are you able to relate to that feeling of being secretly happy when your investment goes well because something really bad happened? I recall one trader recalling 9/11 and saying that his first thought was “How much is gold up?”

        I can’t help but be cynical when our leaders are so disconnected from my reality and have no proactive or forward thinking plans. Meanwhile they openly support and have all the incentive to juice house prices. I’d love to be wrong but I see no good will coming from these guys in regards to housing affordability. I’m just waiting now for the nth rejection of all ideas in the latest affordability inquiry.

      • Phroneo is on the money. Canada just closed the shutters on its ‘cash for citizenship’ scheme with ( as my memory serves me ) 60,000+ applicants in HKG locked out. Where to next? Oh, Australia is still ‘open for business’.

        Son in Law sells RE in Perth ( high end ). Chinese buyers are barely looking at property ( knock one down build 2 or 3 new ). Multiple properties, no finance required!

        I think they might be required to develop within a certain time frame but who says they actually bring the property to market or at a saleable price. Empty investment properties don’t seem to be a problem in China.

        Perhaps there’s a hint of panic. Australia might be next to restrict. Get in while the going is good!!!

      • “It can be changed if pollies are made to fear the consequences of the status quo.”

        You need to make that into a (repeated) headline.

        Despite all the aggrieved rhetoric here on MB re Oz housing, noone seems to have the wherewithal to recognise this insight, and, proceed to network and organise what could / should be a lay down misere winning single issue political party.

      • “pelych” can you provide any more info about whats going on in Perth realestate at the moment. What do you mean by “barely looking at property ?”

        Unfortunately i lost my realestate perth contact after he got caught doing the 18 old year office junior in the actual office in the evenings.

      • I understand that the proportion of Australians who own the own homes is declining at a reasonable clip.

        Unless there are changes designed specifically to reduce housing prices, regardless of the change to existing home owners wealth, at some point marginal electorates will emerge where greater than 50% of voters rent.
        At the following election the winner will be the party which adopts the strongest house price deflation stance. It may be a party which does not yet exist.

    • @ angryman

      He’s been blown away by how casual they are about purchases, sometimes not even viewing the property, just saying “OK I’ll take it”. All of the properties have been ‘knock down & develop’ in good suburbs. $800,000+ prices. I think he said one buyer had maybe 5 or 6 properties.

      Who knows if the same buyer isn’t doing the same in other cities as well.

    • Agree with a lot of commentators. A number of wealthy Chinese become permanent residents because they are prepared to fork out $5m to get their PR visa. They purchase huge amounts of real estate to the detriment of young Aussies. The real estate agents are party to that because they want the sales. The public have not been sufficiently informed about what is happening otherwise there would be a big outcry and then that might force the govt to do something about it. It is really scary that these wealthy people can buy up so much Aussie real estate. How many people are prepared to lobby their MPs and demand that something be done before it is too late????? Already, in places like Singapore, the local Singaporeans are very upset at the amount of property being bought by mainland Chinese at the expense of young Singaporeans who are priced out of the market. Canada has now wisely, put a brake on such investments. Wake up, Australia, before it is too late! On top of that, there should be reconsideration of negative gearing which is really welfare for the rich.

  4. Yes, a terrible catastrophic policy failure (predominately courtesy of KRudd, surprise surprise) which needs to be changed ASAP.

    BUT… Chinese buying could go into reverse in the future but run a bit for now depending on how things play out. We are just importing the Chinese property bubble after all.

    The question is whether you like the risk?

  5. The existng policy is not the problem.

    The existing rules are not the problem

    The problem is the complete regulatory failure of the FIRB and the lack of any compliance enforcement and timely reporting.

    Purchaser self-reporting is not compliance enforcement.

    FIRB Chair Brian Wilson must provide details publically of what the FIRB is doing to “monitor and ensure compliance” with the FATA requirements regarding foriegn purchases of existing dwellings.

    The FIRB must require the proof of the purchaser’s visa status/FIRB approval be recorded on the sale of an established dwelling.

    There must be an independent audit of the last 1000 sales of Sydney existing dwellings immediately to determine the level of compliance and the results published within one month. Audits must then be conducted randomly around the country on a monthly basis and results published within the month

      • BubbleyMEMBER

        I’d also like to add that the real estate agency loses it’s licence. Not just the individual agent – the whole agency.

        This will ensure compliance from the top management structure down and proper training procedures are put in place for staff.

        If the are no consequences it’s just empty bluster.

    • That might achieve some results.
      However, it seems there is a underground sales movement happening where local buyers, as either individuals or structured as property investment company, act as proxy.
      If a local proxy trades as a company, they can effectively and legally act as a ‘holding’ house for an unidentifiable foreign buyer (unless someone leaks the contents of a shadow ledger). The local proxy buyer, as a company, still makes a commission (both for buying a home for unID foreign buyer and ‘releasing’ sale to same buyer once s/he moves here). In the interim, the revenue generated goes to proxy trading company or whatever finance arrangement with offshore buyer was struck.
      The unID foreign buyer will pay some tax on Capital Gain through the trading company but will avoid say a good 2/3’s of inflated costs over say 5 years for example.
      If local trader cuts sales commission to say 1% instead of 2% as per usual here, they will still make same overall commission as 2 sales for each property they buy.
      This business model can happen in full view unless someone blows the whistle.
      Foreign buyer gets a better located home discounted to future cost under this model.
      The unID buyer doesn’t come? No problem – cash the capital gain and sell inside trading/holding company to next on list. This game can run for years as there are now an estimated 63M potential Chinese buyers willing to play the game.
      No losers, except those on average incomes.
      Local property trader gets revenue stream + commissions.
      Govt could not give a hoot, they get CGT and GST on commissions, etc.
      I used to assume this kind of thing only happened in Third World countries.

    • +1
      This could be paid for by confiscation of any non-compliant property. No compensation shall be available given the property was purchased illegally.

      • But that’s only possible if the govt wanted to make changes, and right now, they are very happy with the way things are. We need to understand that this whole issue is not even on the govt’s radar. All they know is that property prices are rising, and if that’s happening even while jobs are being lost, then that has to be a good thing; in fact, the only thing. Remember, their plan for getting Australia out of the shithole caused by the death of manufacturing and jobs going offshore is the property ponzi. They are not worried about selling out to foreigners. They say: “We are open for business.”

  6. It’s quite odd that Australians in general–pundits, general punters, bank foot soldiers, etc–seem to believe that the nouveau riche of China have their sights predominantly on Australia (and Canada to a lesser degree). Is it not possible for other countries to jockey for this tidal wave of cash for residency? Why would Europe and the U.S. not be more desirable destinations for aspirational Chinese? What explains the Chinese interest in high-end properties in Tokyo? Doesn’t Auckland have a higher proportion of Chinese migrants than Sydney?

    Perhaps Australia is too pumped up on its attractiveness and needs to stop salivating at the potential opportunity to kick back and live off the desperation of Chinese for our property, residency, education, etc.

    • BubbleyMEMBER

      Australia is not the only hot spot. I’m currently outside of Kelowna in B.C Canada and looking at buying a recreational property.

      This area is suffering from falling prices because Canadians live here and the work situation is not great. Yet Vancouver prices are going insane because of the Chinese hot money. The Canadian Hong Kong office has just closed applications to purchase Canadian property and put a stop to over 48,000 applications. That was ONE office, it does not include the rest.

      The hot money is focused in very localised areas, Vancouver, Toronto and Montreal. Outside of those, it’s a different story, many Canadians are doing it tough.

      Other hot spots for people who want to get their money out of the PRC are Manila, Singapore, K.L and other Asian country’s.

      It’s not just us, but we do make it easier for foreign investors than many other country’s.

  7. Anyone know of a cheap, relatively stable country where visa access isn’t onerous?

    We may as well go play rich Chinaman somewhere else.

    • Well…yeah. As I alluded to, NZ is desirable for Chinese migrants. NZ is not “cheap” but I would suspect that it’s relatively cheaper than Sydney at the upper end of lifestyle.

  8. Figure 1: 07-08 says it all, this is when the traitorous Rudd and Labor sold out Australia and unleashed the Asian appetite for property.

    • Co-incidence does not mean causation.

      Do you think things would have been different if JWH was in power 07-08?

      Truth is, our pollies receive so many conflicting points of view from vested interests and PS Mandarins. Rather than risk a ‘courageous decision’ they make no decision. It’s much easier to say you didn’t change the last blokes policies and blame / share the blame than go it alone.

      Praise is in short supply when you get it right ( “and so you should, that’s what we pay you for” ). Shrill condemnation is plentiful.

      Who in their right mind would be a politician?. Anyone with the ‘balls’ to make decisions would be a CEO / CFO etc on significantly more with none of the public scrutiny.

      Every time we / the ‘commentariat’ fail to take a balanced ( and respectful ) view, quality people are turned away from politics.

      KRudd may have made mistakes but he made decisions. At least give him the respect for that!

  9. Interesting article.

    I was questioning this logic recently and making the point that Chinese buyers might not be enough

    This article proves to me that if their research is correct, this ain’t going to happen.

    So, there are 1.1 million Chinese who can afford to currently buy a Sydney property…

    Based on their figures there is no way that is enough buying support there to cover the hit to the many more of the 23 mill current residents of Australia.

    Currently property has Chinese and foreign buying and cash on sidelines in SMSF’s on its side as I see it…the falling dollar may provide some support

    Not enough to hold property up at these rising prices once the mining crash heats up.

    And once it starts to crash, herd mentality will take over like every other bubble market in history…and most of those 1.1 million Chinese will step aside…

    It is nearly over IMO

    • Yes, that was my though – especially given that only a fraction of them could possibly be interested in buying Australian property, even if doing so was highly fashionable.

      Notably Australian capital city house price rises rose faster than Chinese GDP in 2013 (10% vs 7.7%), so even the Chinese could be priced out eventually.

      Also, scenarios 1,2 and 3 in the CS report all imply that the house is resold again relatively soon after purchase. Only permanent settlement is longer term, and the figure used here of 20,000 is paltry (yes, some temporary setters convert to permanent but CS don’t appear to take this into account).

      • Yeah (I know my last post sounded like I had been on the turps as I was busy at work)

        My point was just that $50billion odd of property purchases from outside sounds like an awful lot, but in the scheme of things in a $5 trillion market there is no way they will be able to hold things up when people need to hit the exits…I don’t mean when people want to, when they need to because the economy is hitting the wall…

        The Chinese buyers “hook” reminds me of all the talk about gold in early 2011. At that time gold was surely going to $10,000 according to the pundits…on the back of a number of things including Chinese and Indian buying. Remember the images of lines of buyers lining up to buy physical gold (it left an impression in peoples minds of large demand…and it was real…but not real enough)

        There is some truth in the Chinese buying thing for sure, but nowhere near as much as what people think when emotionally assuming “Chinese are flooding the borders”

        It is simply a “hook” to give a seemingly plausible evidence for the ponzi to continue…you HAVE to have something that seems believable (and I don’t doubt that many that are pumping the idea actually believe it themselves) to see property as an excellent purchase.

        Right now in Australia the vast majority of the herd believe in property

        So I think if this report by CS is well researched it gives strong evidence to the critical thinker that we may be nearing the top IMO…

  10. Ronin8317MEMBER

    What happened to the idea of launching a ‘Youth’ political party? It’ll be the only way to change the current situation without a violent revolution.

    • I heard a mainstream radio interview with the head of a growing party that represents the interests of some obscure age range like 12 to 32 year olds. When asked what the issues were the response was at best clichéd and puerile. Better access to high quality broadband and education was about the best they could come up with.

      A talkback caller went nuts about the housing issue, negative gearing etc and was promptly flamed by the late Gen X jock. It doesn’t inspire me with great confidence about the future.

  11. As discused previously in MB, the forgone tax revenue from not charging a 20% “tax” on property/asset purchases is $1b p.a. increasing by ~4.5% p.a… well done government on not getting a benefit from selling out, this even goes against serving their own self-interests. What do people think about rather than letting foreigners buying property for perpetuity, they only effectively buy a lease for a finite period (i.e. 99 years)?

    I also posted the following before on a separate post (http://www.macrobusiness.com.au/2013/08/auction-clearances-still-strong/) but the analysis is still quite poignant although it appears Credit Suisse have doubled the # of chinese potentially interested/capable of buying foreign property.
    ~~~~~~~~~~~~~

    I did some basic sums to assess the level of potential demand.

    Taking population x 0.2% (A) x 1/10 (B)
    (A) = assumption 0.2% of population are in suitable socioeconomic status to consider foreign real estate investment
    (B) = assumption 1 in 10 of (A) would actually consider buying in Aus vs other countries
    Combined population of India and China ~ 2.585 billion

    2.585b x 0.2% x 1/10 = 517,000

    ABS Data # Newly constructed dwellings sold FY 13 = 31,260 or foreign demand = 16.5x, i.e. 517/31.26)

    ABS Data # established dwellings sold FY 13 = 467,763 or foreign demand = 1.1x (this is moot since foreigners cannot officially buy established dwellings, but some are sneaky – http://tinyurl.com/l2tv399)

    Total dwellings sold FY13 = 499,023 or 1.0x

    So if there is some truth to sustained China/India demand, and not counting Singapore/Hong Kong, their sizeable populations can potentially double the existing demand for properties or at the very least provide ~16x the existing appetite for new dwellings.

  12. “I’m sure the mainstream view is similar”

    I doubt it, to be honest. Two thirds of the country would be likely to be salivating at the prospect of yet another boom in their main (sole?) asset class. Some of the other third probably think this is a good thing because they’ll be jumping on board soon to ride the wave too. Ultimately, this is likely to trump any concerns over “selling out the nation”.

    Very depressing, I’ve held off buying for a decade now, but will have to capitulate this year or next, I suspect. There comes a time when I need to be living in a good school zone and not being forced to move every 1-2 years. Sometimes I feel like the “don’t buy now” chants I’ve listened to since 2003 make me more of a mug punter than people who head off to property seminars and walk out with “property doubles every 7-10 years” imprinted in their psyche.

  13. nexus789MEMBER

    I don’t know about others but I am beginning to really dislike politicians. They act in the interests of narrow interest groups and their own self interest. In the past this was hidden but is now increasingly obvious.

    A case in point is housing. many politicians have investment properties and are conflicted. They are ignoring the growing lock out of first time home buyers as it is not in their interests or vested interests to change policies. To keep the gravy train going the current policies allow foreigners to buy property here.

    We should align the ownership of property in Australia to that practiced generally in Asia where non citizens are not allowed to own property.

    We are lead by the feckless and greedy and the general population are asleep.

  14. Also wasn’t it Credit Suisse who released that report a year or so ago downgrading Aussie banks because of over exposure to what looked like an overpriced housing market? With that credit foncier model and lots of talk of interest-only loans etc. Clearly they’ve changed their mind…

    • +1

      EDIT: And she actually had a clue (unlike the Laberal Party) about the economic realities –

      “The greatest cause of family breakdown is unemployment. This country of ours has the richest mineral deposits in the world and vast rich lands for agriculture and is surrounded by oceans that provide a wealth of seafood, yet we are $190 billion in debt with an interest bill that is strangling us.

      Youth unemployment between the ages of 15 to 24 runs at 25 per cent and is even higher in my electorate of Oxley. Statistics, by cooking the books, say that Australia’s unemployment is at 8.6 per cent, or just under one million people. If we disregard that one hour’s work a week classifies a person as employed, then the figure is really between 1.5 million and 1.9 million unemployed. This is a crisis that recent governments have ignored because of a lack of will. We are regarded as a Third World country with First World living conditions. We have one of the highest interest rates in the world, and we owe more money per capita than any other country. All we need is a nail hole in the bottom of the boat and we’re sunk.

      In real dollar terms, our standard of living has dropped over the past 10 years. In the 1960s, our wages increase ran at three per cent and unemployment at two per cent. Today, not only is there no wage increase, we have gone backwards and unemployment is officially 8.6 per cent. The real figure must be close to 12 to 13 per cent…

      We have lost all our big Australian industries and icons, including Qantas when it sold 25 per cent of its shares and a controlling interest to British Airways. Now this government want to sell Telstra, a company that made a $1.2 billion profit last year and will make a $2 billion profit this year. But, first, they want to sack 54,000 employees to show better profits and share prices. Anyone with business sense knows that you do not sell off your assets especially when they are making money. I may be only ‘a fish and chip shop lady’, but some of these economists need to get their heads out of the textbooks and get a job in the real world. I would not even let one of them handle my grocery shopping.”

      http://australianpolitics.com/1996/09/10/pauline-hanson-maiden-speech.html

      • She was the right person at the wrong time.

        If she were a fresh face today (minus some of the more kooky economic stuff) plugging the same themes she would have no trouble garnering votes. Mine for a start.

      • And let’s not forget about the printing money suggestion she made after which she was widely brandished as an economic numpty by every politician and economic analyst in the country. They got plenty of milage out of that only to be proven as hypocrites ten years later.

      • Spot on Jimbo. She could not have been more right about that one, and look at how she was sledged from pillar to post for it.

        WHAAAAAAAAATT!?! Just PRINT MONEY!!?!! Instead of BORROWING IT, at interest?!!!!!!! Heaven forfend!!!!

        Effed up world.

  15. Your prospects as a director on an ASX200 business are looking bleak. The mainstream view on company boards around this country would have no problem whatsoever in selling out this country to the highest bidder. And these same good folk spend a good deal of their time and energy bending the ear of a political class in the thrall of business. The policies will be given the imprimatur of consultancy firms who offer full service happy endings, along with the usual suspect business lobby groups.

    Spin-meisters are working feverishly right now to shape a new narrative for what it means to be Australian in a globalised economy: no-one owes us a living, government needs to get out of the way, the best way to save jobs is to offshore them, (oh, and my favourite – government is not in the business of picking winners. Hilarious) etc, etc.

    You MB boys had better start getting busy on the political front, and yes, it is going to have to be populist, and yes there may be some regrettable recourse to pumping up nationalist sentiment.

    The alternative is to watch while this grubby cohort of glorified strip mall accountants, lawyers, bankers and economic ideologues sell us all down the river.

    • The most plausible way to tackle this matter politically is to use Labor against itself:
      1. Join Labor party (most difficult part of plan);
      2. Find out who is right-wing and who is left-wing;
      3. Direct those interested in survival of working class to this website or similar;
      4. Plan a coup – include gift taxi vouchers for the Labor rightwingers to travel to Liberal HQ and their new home

      Note: Forget the Libs, they despise the working class and can be left alone as a historical marker.

      • Plan a coup – include gift taxi vouchers for the Labor rightwingers to travel to Liberal HQ and their new home

        You’re not going to throw in a copy of ‘Lazarus Rising’ to sweeten the deal?
        Or maybe ‘Recollections of a bleeding heart’ as a souvenir of their misspent younger days…

  16. So China spends $6bn on Oz housing in a year, with much of it going on new supply, and with a couple of strings attached (ok, admittedly enforcement is another thing…)

    That’s about 1.5 times the monthly figure borrowed by housing speculators in NSW alone, who trade in second hand houses, with no strings attached.

    Let’s be clear about what’s driving up house prices, shall we?

    • I wonder how that $ number equates with the totals borrowed (at usury) by the Laberal Party and handed out in the various episodes of the First Home Vendors Boost?

  17. invest-magicMEMBER

    I’m not sure why this makes your blood boil. We’re getting what we deserve!

    The interference in the markets all the way from interest rates to our citizenship (which is for sale at $5m) is precisely why we are here.

    Freeing interest rates from the shackles of central planning will be a great start. 9 ultra privileged people decide the fate of the most important price in our economy! We might as well get a board for ‘chicken fried rice’.

    The words of William White, “All of the models we use are useless!”

    We are where we are because this is precisely where we need to be!

    • You mean we’re getting what the government deserves. We never had a say. I don’t remember being asked whether I think foreigners should be able to buy unrestricted properties. I don’t remember being asked whether I want them to price Australians out of owning a home. I also wasn’t asked whether I wanted massive immigration for the purpose of inflating the bubble.

      • invest-magicMEMBER

        @md. That’s exactly my point! 🙂

        We are here because of the way our system works — where special interests sit at the table (or maybe even ‘above’ the table).

        Just look at the situation with Senator Nash at the moment. Brandis doing his bit for his fin industry. It took months to get rid of slippery Pete and roving Craigo.

        This is the ultimate conflict of interest — the agent needs to get voted while the principal thinks the agent is looking out for him.

        The fact that Qantas could even go begging for a bailout is proof that we have a kleptocracy not a democracy!

        The office of financial management helping their banking masters by buying RBMS with pretense of ‘creating’ a market!

        Can the small business owner struggling about to lose his home go to the govt?

        The system is beyond fixing… all we can do is hedge!

  18. But.. but.. I thought it had something to do with the UGB and land banking?

    So you mean the 45% increase in values in Balwyn and 22% increase in Mount Waverley over the past year has been caused by increased demand from Chinese buyers?

    I am shocked, UE, tell em it isn’t so

    • invest-magicMEMBER

      It’s all of the above – a dynamic nonlinear system.

      It’s not a single factor but multiple factors whose influence is continuously changing that not only affects itself but also other factors and vice-versa infinitum.

      • From the conversations I’ve had with friends that have arrived from the Mainland, Singapore and HK, I can tell you that they all curse the UGB and restrictive planning

        They often say things like ‘i’d buy out past Pakenham if I could but those greedy developers are land banking’!!

        So instead they drop $1.1 million on an old 3 bedroom home in Glen Waverley

        So that is my proof that UE is on the money

      • invest-magicMEMBER

        Easy credit, artificially controlled interest rates, land release regulations, immigration regulations etc etc are all contributing factors.

  19. As a potential FHB, I’ve been keeping an eye on this story.

    Curious as to why the average chinese millionaire wouldn’t pick London, New York, Paris, South of France, etc etc where they would get a LOT more for their money.

    Any ideas?

    • Australia a closer destination to China perhaps, however the USA is their number 1 location for purchasing property.

  20. Last time I checked the Australian govt was elected by the Australian people. Yes I know that sounds contrite but it’s still true. As someone pointed out earlier, there seems to be a significant amount of support to change the FIRB joke. What amazes me is that no one yet has organised a significant campaign to stop this madness.

    But in all reality the Chinese ‘investors’ are buying here because a) they think rising prices means good time to buy b) they want to buy somewhere to resettle their family away from the heavy pollution and heavy handed unpredictable government c) there is real concern on shore in China of a property bubble in the 1st tier cities hence are pulling cash out d) on shore in China govt is putting more and more restrictions on investment properties via high taxes and deposits on multiple properties.

    So basically none of these reasons are because Australian property is good value. It’s pure emotion and fear of what’s going on in China. But unlike the governments in China, Singapore, NZ, Canada etc etc etc, Australia’s stupid, short sighted government, it’s stupid, short sighted central bank and its weak kneed impotent bank regulator things the only way to cure and protect against a housing market crash is to make he bubble bigger….and bigger…and bigger

    The only options here are a) have patience and watch it blow itself up. Yes the market can stay irrational, but equally true is the fact no asset class has ever escaped fair value and mean reversion b) know that when it does blow the mindless foreign investors will be dumping and running faster than anyone else, leaving locals with smashed asset values. Remember the Japanese property investors in the late 80’s and early 90’s who would buy everything that isn’t nailed down from gold courses to high rise buildings? Remember how badly they were burnt when they pulled out and went back home? The Chinese investors have been even bigger fools paid even more on more inflated prices. China itself is on the verge of a major leverage meltdown. Won’t take long till they pull their investments out of Australia and collapse this market. We just need a way of making it happen sooner to make the damage to ordinary Australians less.

    Maybe we need to start a petition to ban foreign investment in anything other than completely new build sites (not knock down rebuilds). Allow negative gearing tax deductions only on new builds. I do recall Prosper trying to get something like this off the ground a while back. Meanwhile start a Mandarin website lambasting foreign investors and the housing bubble

  21. http://www.smh.com.au/business/the-economy/who-wins-from-chinas-property-splurge-20140305-346nq.html

    [“Wealthy Chinese buyers have purchased $24 billion of Australia housing in the past seven years, and are set to pour an additional $44 billion into local residential property over the next seven years, Credit Suisse estimates.”]

    [“Winners of the splurge will be Australian developers with large residential exposure – such as Australand and Mirvac – plus the building material companies CSR, Boral and Adelaide Brighton, the report says.”]

    [“Other companies tipped to benefit are property website owners REA Group and Fairfax Media, and the major banks, “supported by rising house prices” and with Chinese buyers to “provide a marginal new source of mortgage demand.”]

    Basically we are fooked, insanity will reign.

  22. gah, everyone here whining like some 2nd graders. If dumb-ass PRC nationals wanna buy our ungodly overpriced, poorly built crapshacks – then let ’em – good luck with that. Overpriced is still overpriced, all will revert to mean very shortly. Lots ‘o’ spruikers and fear-mongers in this bi%ch…. Most of these purchases (& visas) will be confiscated soon after the China-crash. That’s just how we do here in Aus – send ’em back with nothing – classic bait ‘n’ switch. PRC morons (&MB morons) think this s**t’ll go 30x wage…. LOL 🙂 – have a pleasant day.