Simon Henry, the co-founder of China’s largest international property website, Juwai.com, claims that Chinese investment in Australian residential real estate is unambiguously good for the country, benefiting local sellers and making Australians rich. From The AFR:
“Property values are up, and most who sell in the current market are raking in big profits”…
“The construction industry employs more than 1 million Australians. Many of the buildings they are constructing were made possible by pre-sales to Chinese buyers”…
“To say that first-home buyers are also edged out is not right because their price points are in the [$300,000 to $600,000] range while Chinese investors are looking at higher prices.”
Like most people, I could not care less about foreigners developing and/or buying up newly constructed dwellings. These dwellings at least add to supply, as well as provide an important growth stimulus to the Australian economy. In a sense, apartment development and sales to foreigners have become a new form of export industry for Australia, and is arguably one of the few economic drivers in Melbourne and to a lesser extent Sydney at present. Without this development, these economies would be much weaker, with flow-on effects for jobs and incomes.
But Henry’s assertion that Chinese investment creates no losers is false. By his own admission, it has contributed to rising home prices, therefore making it more difficult for local first home buyers to gain a foothold. One only needs to spend a bit of time in a suburb like Mount Waverley in Melbourne (my in-laws live there) to see the impact of such investment. Once a stereotypical middle-class suburb, the demographic profile has undergone a 180 degree change over the past five or so years, with property values rocketing and basic 1960s-style houses now routinely selling for $1 million. The situation has been repeated in numerous other locations in Melbourne’s South East, let alone across Sydney and Brisbane.
I can only presume that Henry does not have children? While the increased prices created by foreign investment in existing real estate benefits home owners, it clearly penalises those seeking to enter the market and future Australians, who must pay higher prices and take on higher debts than would otherwise be the case. It is effectively a transfer of wealth from young to old (or renters to property owners).
Foreign investment is fine if it creates something new and adds to supply. But if it merely constitutes a transfer of ownership, forcing up housing costs in the process, then controls need to be put in place (and enforced) in order to safeguard the future of younger Australians.