Chinese buyers won’t rescue Australian property market

By Leith van Onselen

Domainfax has posted a wishful article speculating that Chinese buyers will come to the rescue of Australia’s sinking housing market:

“Because few other appealing investment opportunities exist, Chinese have put 53 per cent of their wealth into real estate. In a 2018 survey, Chinese overseas investors named residential property their favourite asset class.”

The report estimates that mainland Chinese buyers will have spent $US129.3 billion on global real estate last year, a growth rate of between 3 per cent and 8 per cent over the previous year.

That level is likely to remain stable this year, with Victoria set to continue receiving the highest share of investment, Sydney coming in second, and Brisbane third, with Adelaide and Canberra next.

In terms of buyer interest, inquiries jumped 58.1 per cent in the fourth quarter last year compared to the same period in 2017…

The forecast is backed up by Australian agents who routinely deal with Chinese residential buyers. Monika Tu, director of agency Black Diamondz, says 2019 has already kicked off strongly…

The claims fly in the face of Westpac’s latest property survey, which revealed crashing Chinese demand:

The boom in Australian real estate sales to foreign investors has run its course, with NAB’s latest survey results continuing to highlight a decline in foreign buying activity resulting from policy changes in China on foreign investment outflows and tighter restrictions on foreign property buyers in Australia. In Q3, there were fewer foreign buyers in the market for Australian property, with their market share falling to a 7-year low of 8.1% in new housing markets and a survey low 4.1% in established housing markets.

MB believes the withdrawal of Chinese buyers is likely to continue. As China slows this year it will eventually be forced to cut its own cash rate. That is going to pressure the yuan lower and trigger capital outflow. Given the danger that poses in an exacerbated trade war (and other current account risks), this will result in even more Chinese capital account tightening meaning that Chinese individuals and businesses will be unable to get money out of China and may, in fact, be forced to repatriate it.

We see this process as structural and irreversible.

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Comments

  1. TailorTrashMEMBER

    Oh goody ….my generation can continue to get the dosh for our cruises…and our children can become more homeless ……..
    Domain is a cancerous growth on a misguided society .

  2. I love how the inconvenient fact that this market consists in large part of FIRB avoidance is just ignored.

    • This is true. And this is also why its possible that Chinese money is still ramping into the country even as Westpac says (using official stats) that it isn’t.

      I tend to think everyone is overthinking it. Just think about the basics. The Chinese have plenty of options and they are not so dumb as to keep buying in a falling market where apartment buildings develop extra bonus cracks right after you buy them.

      • My Chinese brother in law likes to buy gold and investment property in places like Singapore and Hawaii.
        He is a civil engineer owns a EPC contracting company not desperate to get money out, has plenty off it, I would say he is what a true investor should be, aside from residential investments, owns some farms, employs managers to sell the produce, owns some industrial real estate which he built and sold off portions. Also has a steel fabrication business. Now looking at getting into value adding food production using some of the produce which is where I’m helping providing contacts with Australian “organic” produce consultants who can provide consulting work to teach his employees and to gain certification.
        All the money invested comes from the profits of his EPC contracting business.
        Having traveled a fair bit, he came to Australia a couple of years ago and shook his head at the quality of our new apartments and project homes on offer via Juwai. Did not think it was good value for money compared to what he has purchased elsewhere.

  3. Mr SquiggleMEMBER

    Anyone got any theories as to why the month of August figures so much in the Juwai.com table in the article?

    • Is Golden Week around that time? Actually that’s a Japanese Holiday? What’s the Chinese Holiday where they go on a buying spree called again?

      • Stone the Crows

        And the very best for Golden Shower Week, why Dom Perignon, Moet and a few Bollingers for good effect. All good catalysts, just ask Reusa to confirm the gushing effect once once the bubbly has been imbibed ?

    • Probably just peak northern hemisphere holidaying season. Chinese Golden Week is first week of October.

  4. why can’t the indian buyers pick up the unsold or lesser bid housing stock when the chinese reduce .. and on account of their relative size .. why don’t they buy in our little pond ?

    • Chinese money is actually Chinese credit.

      Indians are not the recipients of one of the biggest credit ramp-ups in human history.

      • But Indians pool their money. It is not uncommon to have 3 sets of adult couples living together (a couple and two sets of parents).

      • And they’re still poor Chase. Some of the wealthier ones do come, but like two lots of our friends they head back to the slums of India ‘for a better life’. Servants and low cost of living are the two key factors. Australia and the first world is a mirage con job to many of them.

      • Indian Real Estate Agents still hounding us in Lara/Little River Vic 3211. They are the *DUMB money imho.
        Trying to buy in a rural area that has a flight path over it, zero infrastructure, an agricultural zoning overlay etc.
        (*unless they know something we don’t.)

      • Careful jimbo, you might be accused of being from the sub-continent just for pointing out there are those who think theres a better life anywhere other than in australia. Nope migrants must appreciate the medicare they pay for here.

      • Divya, good try. The recent migrants from the subcontinent keep coming. There is enough here, for long enough, to get the word out via Whatsapp. Whatsapp and limitless free phone calls means any ‘mirage’ you speak off would be easily killed off. They keep coming, the reality of what we offer must still appeal. The example of your well-to-do family arriving here decades ago doesn’t apply to the bulk of new arrivals from the subcontinent.

    • The China money narrative is that they are desperate to get money out of China and into a safe haven. They are so desperate they will even take a loss (so goes the narrative).

      This doesn’t apply to Indians. They are in it for the gains not the safe haven bid. There is absolutely no reason for them to keep buying in a falling market.

      • Weird how they buy here to o gain ‘rule of law’ type security whilst their activity demonstrates just how flexible the system really is when you have a big suitcase full of cash. The safety assurances should logically deteriorate with every illegal purchase. Links between money laundering and criminal syndicates with our political class grow stronger and more entrenched. How long before they realise we’re once again just a dumping ground for criminals? Oh and by the way, now the hard times are here and we’ve learned how to be so ‘flexible’ we might actually start retrospectively enforcing the laws, keeping the asset and sending you home. Sounds like a vote winner to me, with no complaints from existing voters or legitimately arrived, hard working migrants either.

      • Lenny Hayes for PMMEMBER

        Dubai and Singapore a much more preferred option for those with cash and not looking to emigrate.

  5. ““Unlike Australians, Chinese also lack appealing alternative investments at home,” said Juwai chief executive Carrie Law.”

    Hah! Australian property investments didn’t look so appealing last year, did they? The extra page views were probably existing investors wondering how much of a haircut their neighbours were taking and whether they should get out. Whatever they were doing, they sure weren’t buying.

    • And the RE investment in their own country are in many cases not investment at all but cases of fraud. 24% non performing loans, ghost cities and 64 million empty apartments. Sooo ffing savvy

    • +1
      In many cases entire families are on the hook — families and friends have all gotten together to raise the funds for a deposit for an Aussie housing lotto ticket. There will no doubt be several sweaty Chinese speculators (pardon me, investors) back home.

      It’s a guaranteed win, don’t you know.

  6. The counter-argument to this is that as things start looking worse domestically in China, more and more people will want to get their money and kids out. China is battling to control capital outflows, Bloomberg reporting that outflows through Hong Kong were up 108% last year.

    Australia is a welcoming place, and many suburbs are now a home away from home for the wise wealthy Chinese person looking for a safe place to live.

    • Australia doesn’t survive a China crash, which is what you’re describing.

      A flight to safety does not involve Australian assets (a proxy for China).

      • “”The counter-argument to this is that as things start looking worse domestically in China, more and more people will want to get their money and kids out””…………..will want to, may not be able to however

  7. Looks like this rally may have run out of puff and we’re on our way to retest the lows. Might be jumping the gun; it will be interesting to see what the week ahead holds.

  8. RE agent in area 2118 and surrounding areas has sold 6 pre existing houses to the same China man. All he does is change 1 letter in his name every time.
    Says its not his job to enforce the law.
    National Audit on every sale over the last 15 years would sort it. Bring it on. ✊

    • There is a difference between suspecting a crime is being committed and knowing a crime is being committed. If agent doesn’t report they become an accomplice.

      • On second thoughts, that area has a 2% gross rental yield. Let him buy more properties before it crashes, then report him.

    • I can’t see a National Audit happening — the forced sales would be just another dead weight for the property market.

      • proofreadersMEMBER

        Pointless – he’s just the sort of innovator Straya applauds, plus pollies/bureaucrats probably have no deep interest in vetting because as a class, they are surely pretty high in IP specufestors?

  9. “Because few other appealing investment opportunities exist, Chinese have put 53 per cent of their wealth into real estate. In a 2018 survey, Chinese overseas investors named residential property their favourite asset class.”

    Don’t Australian have something like 60% of their wealth tied up in real estate?

    Lol

  10. Juwai could be full of sh*t and lying…. They have a business incentive to. But there is stimulus going on and accelerating Chinese student numbers… note the following

    “Chinese students who turn away from US schools and universities may also choose Australia instead, which would also have spill-over effects on local real estate investment.”

    tis real

    • C.M.BurnsMEMBER

      “may” also

      There’s an entire pacific rim of countries for them to choose from. The one with the crashing property market may not be near the top of the list for most.

  11. Mr SquiggleMEMBER

    Just read the article. It seriously talks about juwai as a “property porthole”…. bwahaha… porthole. Don’t they mean “portal”?

  12. kiwikarynMEMBER

    Bound to have picked up some enquiries from those who were hoping to buy in NZ but who now cannot. Should be another bump this quarter as NZ implements anti money laundering laws on real estate agents.

    • Chicken feed to them….job done, got money out of China, sold with who cares what loss, transfer money to swiss account via aus, job done…

    • or as Rob says she has managed to now get $13.5 million in cold hard squirrelled away somewhere like a swiss bank account.

      when the money is hot you don’t really feel the loss. see 1 MDB. Even the real wolf of wall street was onto the scam when he went to a film premiere hosted by Jho Lo. He said no one who had worked honestly for their money would spend it like that guy …

  13. foreign buyers scamming the laws are part of what broke the property market. Rescue it? Someone at domain needs re-education, preferably in china.

  14. Monika Tu of Black Diamondz clearly can’t spell. Not only that, she is an infected pustule on a swollen throbbing haemorrhoid on the impacted anus that is the Australian property market. Soon may she pop.

  15. ▫️As long as the Chinese, Korean, Taiwanese, Malay, Indian, Nepalese, Bangladeshi, Middle Eastern, African foreign criminal syndicates can buy an established Australian dwelling via a local PR or Citizen grant proxy andcvyosss all FIRB controls..
    ▫️As long as Australia is a safe haven with no checks or repatriation,,
    ▫️As long as they can convert the dwelling into a migrant guestworker only – 3 families or 9 students, sublet via a fake or transient lead Tenant – paying cash each week for the bunk, bag of rice, wifi & toilet rolls deal..
    $170 each or $1530 cash a week
    And only declare $500 in rent paid & the other $1,000 taken as cash… And the migrant proxy then collects negative gearing as a kicker,,.
    ▫️As long as there is no occupancy use checks, the unit or small house in a migrant friendly paid off council,
    ▫️As long as the migrant guestworker population -now 2.8 million continues to soar… equivalent to an additional 15 years of PR intake now.

    ➡️ Then the cash flow to the foreign criminal syndicate is assured. To then buy more Australia properties.

    And it’s all about cash flow, not capital gain.

    The nutrient in all this is the migrant guestworkers.
    2.4 million TR & 440k tourist visitors working illegally (DHA Est is 5% of the 8.8 mllion tourist visitors)
    I have posted the Dec 2018 details in this forum before.

    2.8 million migrant guestworkers.
    1.4 million in some form of visa breach.
    90% of the 2.8 million are in Sydney & Melbourne.
    1.3 million migrant guestworkers in Sydney, 1 in 4 people.
    1.1 million migrant guestworkers in Melbourne, 1 in 5 people.
    400k elsewhere.
    That’s your issue.

    How many ex Australian properties have had the Australians evicted and are now occupied by the 2.8 million migrant guestworkers?

    2.8 million migrant guestworkers.
    96% plus who rent in ‘private shared accommodation*’ (DHIA & SCC housing use studies).
    *Code for migrant only sub let cash in hand.

    That’s 2.7 million private migrant guestworker shared dwelling usage renters.
    That 400,000 dwellings at least (at 6.5 migrant guestworkers per dwelling conservatively, over twice the normal 2.9 Australian occupants per dwelling (ABS)

    At say a dwelling price of a modest $500k each – they are invariably small very old run down units or old small Inner, middle & outer suburbs housing along the train or bus lines,

    That adds up to $180 billion of Australian established housing now being used for just migrant guestworkers.

    These 2.7 million migrant guestworkers renters pay some $25 billion in cash rent to the proxy & foreign criminal syndicates, but only $10 billion is declared (legal occupancy or the minimum) & a $3 billion or so of NG is also stolen from the Australian taxpayer.

    The migrant guestworkers are the largest single bloc of renter types in Australia. 2.8 million of whom 2.7 million rent.
    Much more than 1.9 mllion PR in the entire last decade of which only 1.5 million rent. (ABS).

    The TR are by far the majority of renters in our main cities. By far the major occupants of our vast migrant slum suburbs. (Where do people all think they live?)

    My point is this:
    The underlying TR nutrient hasn’t gone away.
    It’s growing. 6-8% a year.
    Housing stock hasn’t increased to demand.
    Legal use vacancy rates have grown and declared legal rents have fallen due to the new housing on the market.

    But the foreign criminal slumlords haven’t dropped their cash price for a bunk, rice, wifi & toilet roll deal.

    That has actually gone up (go check gumtree) but they are just declaring less rent – because that’s how the blackmarket shadows any dip in the legal market to declare less rent & steal even more as cash.

    Yields & cash flow.
    A $500k 2 bed unit, plus SD/costs/bunks & fitout rom Bunnings & Freedom Furniture for subletting. $550k.
    9 migrant guestworkers paying $170 week
    (common, normal, routine, everywhere)
    $79,560 – 14.4% yield.
    That’s why they buy established old modest Australian city properties in the migrant friendly zones.

    But only $500 declared – $26,000 yearly, 4.7% yield.
    $53,000 or $1,000 a week cash, plus NG cash back.

    The 2.8 million migrant guestworkers & the 2.7 million of them that rent – they have to live somewhere.

    The number is going up 6-8% each year.

    All that’s going to happen in the ‘house price & rent downtown’ is the acceleration of established Australian housing & occupancy to foreign owned sublet migrant only occupancy.

    Whole suburbs now have been cleansed of Australian families and replaced with migrant only guestworkers high density occupancy cash renters.

    116,000 Australian permanent homeless. In the gutter, sleeping in parks & cars.
    350,000 Australians without affordable housing.
    Australian young people denied the opportunity to even rent a property in normal occupancy usage, let alone ever buy one.

    This government is weak, foolish and deliberately blind to the corruption, abuse of the Temporary Visa program that is the ‘Core Nutrient’ of all this.

    And Labor is even worse.

    Why aren’t our young people & citizens of Australia out in the streets demanding the termination of the corrupted temporary visa programs?

    Can’t they make the association between an uncontrolled migrant guestworker intake nearing 3 million onshore, foreign money laundering, housing use corruption & the impact to them personally?