Is Chinese property buying making us rich?

By Leith van Onselen

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.

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Comments

  1. reusachtigeMEMBER

    That’s right! Smart investors are making massive profits while new smart investors get in so they too can soon make massive profits thanks to alien investment. It’s a win win for everyone. Only losers lose.

    • reusachtigeMEMBER

      I read that as sweat shop owner. Thankfully they are buying up all our property which is great because it increases the value of our houses!

      • no matter what analogy you use, foreign investment is always positive, especially if it pushes up house prices! The winners win, and they deserve it. The losers learn how to win.

    • Smart investors? Maybe intuitive investors. Anyhow., when it all topples it will be good to see which ‘smart’ investors got out in time.

  2. Like most people, I care a lot about foreigners developing and/or investing in newly constructed dwellings, even if they do add to supply.

    I care because I see out cities turning into high density shitholes. I care because I see tomorrow’s slums being built right now. I care because I don’t like seeing us sell out to corrupt foreigners and being used as a money laundering centre.

    I care because I hate seeing the government waste money on inadequate overpriced infrastructure as a response, while cutting back on the fundamental services that separate Australia from the countries that our new immigrants seem so happy to get away from.

    I care because I worry that ridiculously high immigration today- with inadequate social resources to back it up- will turn into the social problems of tomorrow (and I say this as someone who is generally pro immigration, for social benefits as much as anything).

    I care because I don’t like seeing our quality of life sold out to benefit second rate plutocrats.

    • A lot of good points made ajotsu. Residential real Estate, formally recognised as houses or perhaps even homes or shelter has been repositioned in this country’s psyche from a basic need to a nitrous boosted speculation and conse

    • A lot of good points made ajotsu. Residential real Estate, formally recognised as houses or perhaps even homes or shelter has been repositioned in this country’s psyche from a basic need to a nitrous boosted speculation and conse

      • wtf? Try again.

        A lot of good points made ajotsu. Residential real estate, formally recognised as houses or perhaps even homes or shelter has been repositioned in this country’s psyche from a basic need to a nitrous boosted speculation and consequently become a drag on the entire economy.

        This Simon Henry is a conflicted fool who demonstrates that he actually knows nothing. Or perhaps more likely he understands exactly what is happening, but taking any other stance doesn’t serve his interests.

        It’d be refreshing if these type of people just shut up and went away, but they are absolutely relentless in their pursuit of self-interest.

    • Not all foreign money is corrupt, and nobody forces the developers to build high rise ‘dog houses’. Unfortunately, high rise apartments are predominantly investment properties which the buyer never intends to live in it. That allow the developers to cut corners, and create apartments where room sizes are similar to the prison cells in the 1800s.

      If you look at the budget of your local counci on ‘social resources’ spending, most of the ‘infrastructure spending’ is actually just ‘land banking’. The councils are using the developer’s levy to buy up existing land to use as ‘parks’, thus drive up land prices even more.

  3. “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.”

    Another Peter Fraser disciple. Go and ask first home buyers in Scoresby, Mulgrave, Rowville, Wantirna South etc (historic neighboring, first home buyer suburbs to Mt/Glen Waverley), whether Chinese investors are having an impact on them. It’s called RIPPLE EFFECT. I’ll even spell it if it helps force it into their craniums.

    What do they reckon local buyers who couldn’t compete in the Waverley area might do? That’s right they look to neighboring suburbs and start displacing first home buyers.

  4. 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.”

    Ahhhhhh……… 300-600k doesn’t exist any more because of investors YOU MORON

    I hate RE because anyone, even the 4 brain cell types like this guy, can make money out of it and then think they are a genius and can lecture people.

  5. While mount Waverley is popular with Chinese nationals, it is significantly speculated or purchased by Chinese Australians as well. A lots of real estate agents (citizens or PR) leveraged to the eyeball to purchase in mount Waverley for two reasons, plan to sell for significant capital gain or for the school zone.

    Frequently the real estate agents are STEM or accounting/finance educated, but cannot find any jobs in that field. So both the husband and wife work in real estate because the pay is great, which allowed them to take out $700k+ mortgage income. They do it because mount Waverley is the sure thing (though still a long way behind Glen Waverley apparently) because the school zone is so good. They reckon they can possibly lose.

    • Also, one common way to fund property purchase in Australia, most Chinese sell their extra real estate investment in China. Most of the Chinese millionaires have their wealth in property in China, but not much liquid asset or cash. There are significantly more millionaire landlords than millionaire businessmen.

      If Chinese property drops significantly more, they won’t be able to fund their purchase in Australia.

    • They (RE agents) probably can’t lose because they frequently pull thousands of dollars for a few hours of work ‘selling’ places that basically sold themselves.

      If they were financial planners or similar, journos like Alan Kohler and Adele Ferguson would be all over them. This continuing percentage based fee for providing a point of contact for the sale of societies most expensive and over-inflated commodity is a bad joke.

      RE must attract a certain personality type, because I would have been embarrassed to present an invoice for the amount it cost me last time I sold a house. But of course it is just quietly subtracted from the biggest sum of money people have generally seen in years, so it doesn’t seem that bad.

      To label them parasitic ticket-clippers is too kind.

      • Not too sure RE agents attract any particular type of people, it more a case of RE agents is the only type of job Chinese migrants could get these days, other than working at a restaurant.

        There are just so many cases where an agent I talk to say they used to be a researcher, engineer or accountant in China. RE agent to Chinese is like what taxi driver is to Indians these days.

  6. Here’s a novel idea – how about we save and build our own houses?
    (Joins littleguy in the ‘silly boy’ stakes.

    • Did you mean you found that idea in a novel?

      They call that sort of stuff fiction these days.

      Saving to buy a house?

      Heavens to Murgatroyd.

  7. It staggers me that people fail to see the cost of cheap investment apartments on the city of Melbourne. The cost is massive, not only the cost of destroying the integrity of the city, the infrastructure, and the aftermath left behind.

    New York was decimated by the “cost” of low quality high density housing – as have many other cities around the world.

    Even Melbourne bore a massive cost due to the commission housing in areas like Carlton.

    Seriously. There is a cost – there is ALWAYS a cost – some just chose to ignore it like Abbott and pollution.

  8. Ponzi schemes are always profitable if you get in early.

    There is a smug attitude held by early entrants that they somehow deserve huge gains. No empathy for those now holding huge mortgages or forced into renting.

    A few winners are sitting at the top of the pyramid. The losers at the base of the pyramid will soon feel resentful when they discover that there will be little chance of realising similar gains in the future. The base will crumble first.

  9. I live in Sydney. Last time I checked there weren’t too many $300K houses sitting on the market patiently waiting for FHBs with young families to come along….

    • Not many $300k units for that matter either. Barely buys you a block of land in a new development these days.

  10. Leith I have an issue with your assertion here:

    “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.”

    Whether you are talking residential towers in the CBD or 700sqm house blocks in Glen Waverly the issue is that the land is not available for local’s use and adds to scarcity of land and therefore increases price of land. High land costs are a brake on growth.

    Towers of dog boxes, although plentiful, are neither suitable nor desirable for locals. One might go as far as also saying they are not available for locals. Your added supply argument is void if those towers are direct marketed and sold to overseas Chinese investors who keep them empty. Even if in the long run, the dog boxes are sold, they are still broadly not appropriate to live in for the majority of locals.

    The alternative is better built, mixes of larger 3+ bedroom apartments that are suitable for a broader cross-section of society than just the sole person living in a broom closet.

    The economy has been led down the garden path reliant on capital mis-allocation to construction for too long.

    These vertical slums may stand for the next 100 years or more. We are yet to see demolition/implosion of any large towers in a concentrated urban space such as Melbourne. The likely outcome being that these buildings will need significant re-engineering to have any utility and meet the future market rather than being knocked down and replaced.

    Frankly, I’d rather seem them NOT be built at all. I’m more for the Euro style low rise along transport links built on brown-field sites and leave the bloody suburbs alone style of nimby-ism.

    • I’m with Aaron, selling out to foreign investors is just stripping opportunities from locals and exaggerating scarcity. What is the point of new builds, built in good areas or locations if they are just being exclusively developed and sold to foreigners? Meanwhile we are pumping the population ponzi but selling the much needed housing to foreign entities. People complain about about negative geareres monopolising established property, yet new builds are being monopolised by foreign investors, we still lose out. There is no win in this situation. Our cities and communities are being destroyed by foreign and local investor greed, pure and simple.

  11. Back in the 80’s I had a nice little house in the inner city but what made it special was the energy and creativity of the people, the music, the craft, the food, the debates. Now the rich move in really quite boring and pretentious with no real energy so why do the young want to buy there anyway? So they have the skills, they have the uni degree so they have the power. So they should not try to compete for boring but find a new place to gentrify.

  12. Of course it did!! The massively overvalued AUD made every single Aussie richer than ever before.

    The trouble is, you can never realize the inflated purchasing power of AUD in Australia (without importing).

  13. http://www.news.com.au/finance/business/rba-keen-to-avoid-housing-bust/story-e6frfkur-1227127424785

    “RESERVE Bank governor Glenn Stevens says he wants to make sure a housing price boom doesn’t turn to a bust and stifle economic growth.

    IT should be possible to extend the current period of above average building activity for longer than the normal upswing, Mr Stevens said in a speech in Melbourne on Tuesday.
    “A high level of construction, maintained for a longer period of time, is vastly preferable to a very sharp boom and bust cycle,” he said.”

    Hate

    • He’s jumping at shadows. All over the place, completely lost the plot! Does he actually know what’s going on?

      I presume we’re no longer taking the heat out of the investor segment?

  14. The entire economy & all the punters are consumed by the wealth of their increasing house(s) price. Its absolutely impossible to have a discussion around the BBQ re “property bubbles”. We don’t have house price corrections in OZ like those dumb Americans in the GFC period. We’re not like that, our banks are awesome blah blah blah…don’t mention their crap CapAdeq ratios, no-one gives a sh!y…can’t have bad talk in OZ. We’re so special, houses only go up……..POP