A recent survey of 150 Chinese member agent companies of Australian based business-to-business off the plan marketing firm Investorist has revealed that Chinese demand for residential property across the globe is set to increase in 2016, with Australia identified as the most popular option.
“Globally demand is going to increase and the demand in Australia should increase,” Investorist founder and chief executive officer Jon Ellis said.
“The popularity of Australia as an investment location is strengthening in China and the number of businesses that are making Australian property available to Chinese consumers are growing,” Ellis said.
According to the Investorist survey, there are four drivers behind the demand for offshore residential property among Chinese buyers; Investment (41.8%), Education (26.7%), Migration (19.3%) and Lifestyle (12.2%).
Sixty per cent of the respondents identified Australia as the number one market for Chinese residential buyers, though Ellis said recent changes could jeopardise that.
Ellis said a recent crackdown by Australian banks on lending to foreign buyers and the decisions by the Victorian government to hit foreign buyers with higher land tax and stamp duty charges could impact how Chinese buyers view Australia.
“We do domestically have some challenges with things like banking and the state government of Victoria making some fairly unfavourable new pieces of legislation,” Ellis said.
“I still say based on an economics point of view the [Victorian] decision is still not a bucket of cold water. But is a clear message and it’s a clear message at a time when Australian banks are saying no foreign purchases and then you’ve got a state government saying we’re going to penalise you again. I think it’s crazy.”
Ellis said the Victorian decision will likely see Brisbane become the chief target for Chinese buyers in the near future.
“I think it will take the focus of Melbourne and certainly put it onto Brisbane. Sydney mechanically doesn’t have the market mechanics of Melbourne or Brisbane, the sales focus there are much more locally orientated, so Sydney has to do a bit of pivoting for it to become a global investment hotspot.
“I think it will send more focus on to Brisbane, which we’ve already been seeing over the last six months anyway. This year Brisbane’s has really increased it favourability.”
Conditions in China could also impact demand, with Ellis saying the Chinese government’s efforts to stop capital leaving the country are something that needs to be monitored.
“It’s increasing. There was a range of banks, depending on who you speak to some people call them illegal banks and others call them private banks, who were helping Chinese people expatriate funds, now there are only two registered financial institutions that are helping Chinese people expatriate funds , which are Standard Chartered and HSBC.
“Bank of China and some of the other Chinese banks have got various different schemes to assist people, but it’s something that’s certainly caught the eye of regulators in China and it’s certainly something that people need to keep an eye on.”
According to the Investorist survey, apartments (58%) are the most popular dwelling type among Chines buyers, followed by townhouses (24%), houses (16%) and house and land packages (2%)
While apartments are the popular choice among Chinese buyers, their attention has moved away from micro and one-bedroom apartments as they look to replicate how Australian investors approach property.
“Your first time purchaser of property will look very much at price, the first decision you make is around price and dipping your toe in the water. Your second and third time investors that have dipped their toe in the water and have realised that it’s ok starts to look at fundamentally what makes a good long term investment.
“The Australian property market is about capital growth. The mindset of a property investor here is very different to other parts of the world.
“In Australia, yields are not as important and yields of 3% or 4% are considered acceptable and anything above that is considered good and Chinese investors here are not playing the yield game, they’re playing the long term buy and hold and capital growth game.”
