China chokes Aussie property bid

From the AFR:

Chinese purchases of Australian property have dropped significantly in the past month, according to local property agents, as buyers struggle to shift money out of the country following Beijing’s move to tighten capital controls.

One Chinese property agent, who focuses on the Australian market but asked not to be named, said the latest effort by the central government to avoid large capital outflows was having a “significant impact” on his business.

“It has affected 70 to 80 per cent of current transactions and some have already been suspended,” he said.

…Chinese banks have been told to set up a watch list for unusual transactions, according to one bank manager, who also asked not to be named because he was not authorised to speak about the policy.

Australia’s new significant investor visa program is another choke point with only seven applications since the new rules came in on July 1 stipulating productive investment.

Expect this to continue as the yuan continues to devalue against the greenback as it rises and China fights to prevent a disastrous capital outpouring.

A sluggish Spring property season indeed.

Houses and Holes
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  1. Still time for Uncle Joe to cancel his ‘promise’ to begin FIRB enforcement in December and terminate all ATO investigations into property transactions.

    EDIT: Maybe he’ll need to offer some kind of ‘First Time Foreign Investor’ grant.

    • – although I guess in the event that Joe loses his position as a result of the leadership spill, the whole amnesty til December thing will be forgotten about anyway and the ATO taskforce will never get around to reporting.

  2. Bewwwwdiful.

    Central Chinese control doing what our feckless politicians and statutory authorities couldn’t: a) enforce the fricking law, and b) stare down the real estate monster.

    • Josh MoorreesMEMBER

      Well to be fair to the chinese this is a matter of life and death for them if they can’t stem the capital flight.

      • Action on the FIRB front is literally a matter of life and death for the AU economy. All the OTP is being sold to foreign purchaser. Locals who are also purchasing are only doing so in the belief that the Chinese will continue buying our housing and forcing housing up.

        When you remove those two purchasers you will see a massive void in demand for these projects and an overnight fall in any development getting off the ground.

      • Lab,
        FIRB approval for new builds only.
        Enforce it. No Exceptions.
        Construction will benefit from enforcement.
        Win. Win.

      • Josh MoorreesMEMBER

        oh yeah I know but my point is the chinese don’t care at all what is happening in Australia, they are doing this to keep the ship afloat.

    • “Central Chinese control doing what our feckless politicians and statutory authorities couldn’t”

      Yes – great news for a change.

  3. At last we have reliable data on foreign investment….one unnamed real estate agent……..and this unsourced nonsense passes as news in the AFR……. and MB…lol
    What does the actual data say?
    Oh that’s right…. there is none….

  4. It is more than just the tightened capital controls (although they are probably a big part of the picture)
    From Simon Ting via twitter.
    Beijing property sales -20.5% in 1st half September vs August.

  5. Will be interesting to see if a larger percentage than normal of the sales over the past two months fail to settle.

  6. The other thing….
    How many apartments which have been sold to Chinese investors will now not settle?????

    Methinks the number could be significant.

      • Was thinking of established property.

        So there is a risk that for up to a year or more sales could fall through on completion because they were bought by people buying on the basis of money in the stockmarket, where it is now trapped unless they crystallise enormous paper losses (and which won’t give them enough to cover their obligations) i.e. OTP sales made any time between February and late June (given the additional falls in July and August)?

      • I’m thinking off the plan.
        Definitely talking in the 10s of thousands of units currently under construction potentially exposed here.

      • Not to mention the Chinese could just lose their deposit and break the contract if the apartment value feel by more than 10%. Whereas Australian purchasers will be sued.

  7. wasabinatorMEMBER

    Excellent. That should be some of the last greater fools out of the way. One wonders which nation will be next for us to try to sell the kitchen sink to? India?

    • Except India, with far fewer high net worth individuals than China has effectively been priced out by the Chinese before they had a chance to get started.

      • Stats, how long has it been since there has been any good economic news? Except of course the supermarket code of conduct.

        Really a long time, all the while the ponzi walls are being chipped away at. A gap will open soon and it will be interesting if the flow is in or out.

      • We should have done that first, to get the best price out of the Chinese.
        It’s a pyramid scheme – it doesn’t work unless the next layer underneath has more greater fools with more money.

        The answers lie back in time.

        (although, to be fair, it might have been a tad unrealistic to put Sydney and Melbourne head to head against London in trying to convince Russian oligarchs it was worth forking over not that much less than they were paying in London to be half a world further from the action)

  8. Only a matter of time before the Government announces a humanitarian program to offer asylum to 100,000 Chinese property investors (and their capital – actually just their capital would keep Joe and Tone happy).

    A bit of holy water to turn them christian and the deal is in the bag.

  9. Australian house prices are rising only because they are rising. Once they stop rising there will be nothing supporting them so positive feedback will turn around into: Australian house prices are falling because they are falling.

    spiral of death in upon us

  10. I do hope these reports are genuine and not an attempt by vested interests to throw things off scent ….
    This farce needs to end ASAP ….

  11. This is big news. I hope it is true and has a swift and shocking effect on house prices. I am relatively well off but the damage the housing bubble has done to the middle-class who were prudent not to buy needs to be rectified. I no longer care about the fallout or how bad it is.

  12. If this is true, all those geared specuvestors, the banks and the RE spruikers will be exquisitely exposed as the frauds they are. Stand by to stop government bail-outs of the guilty.

    Prices have a long way to fall, even in a near-nil interest rate environment. We await genuine discovery with keen attention.

    Don’t Buy Now!