Sydney’s housing rebound continues in earnest, with values rising by 3.5% from their 7 February low, according to CoreLogic’s daily dwelling values index:
This rebound in values has occurred despite three 0.25% increases in the official cash rate by the RBA in early-February, early-March and early-May.
This situation is highly unusual, given house price rebounds have typically occurred after interest rates were cut, as illustrated in the next chart from AMP chief economist Shane Oliver (see purple ovals):
Over the weekend, several articles appeared in the mainstream media explaining the strong demand for Sydney property from foreign buyers (especially Chinese).
The SMH reported “cashed-up Chinese buyers have re-entered Sydney’s property market with gusto”, driven by the border reopening and massive savings built-up over the pandemic.
According to Daniel Ho, co-founder and group managing director of Juwai IQI, an Asian property listings company, neither the Chinese housing market nor the share market are appealing to Chinese investors.
“The confidence many Chinese had in their own economy and housing market declined during the pandemic, so overseas markets like Australia look better by comparison”, Ho said.
“Chinese households added more than $US2.6 trillion to their bank balances in 2022″.
“Real estate in Australia might be the ultimate revenge purchase”.
Listings views by prospective foreign buyers are significantly above pre-pandemic levels, with hits from China up 131% at the beginning of March this year compared to the beginning of 2020, according to Domain data.
Peter Li, managing director of Plus Agency, also told The SMH that recent housing developments in Chatswood have sold to Chinese buyers.
“All the apartments that were still available after completion were sold to Chinese buyers”, Li said, adding that half of his FIRB-approved buyers pay with cash.
Meanwhile, McGrath’s managing director and CEO, John McGrath, said demand from Chinese buyers is higher across all price brackets.
“Clearly during COVID that [demand] ceased, but we have seen a strong bounce-back, especially in the last three to four months”, McGrath said.
“A lot of people are wanting to park their currency in Australian dollars and in a safe and stable political environment”.
“We’ve been helping a lot of buyers in the Eastwood, Epping and Marsfield areas because of schools and transportation”, McGrath Epping’s Steven Xie said.
“It’s not just because of affordability, it’s better education, better environment”.
“I had a buyer that didn’t need to use the bank. They were cashed up”.
The increased foreign buyer activity is a plausible explanation for why Sydney values are rising so strongly in the face of ongoing rate hikes.
Given listing levels are low, and there is a dearth of homes available for sale, the added demand from Chinese buyers is having a larger than usual impact on prices.
