Mar 10, 2014

Chinese real estate invasion? Not according to the data, fellas

Complaints about Chinese buyers inflating house prices miss the fact that foreign residential property investment encourages new housing construction.

Bernard Keane — Politics editor

Bernard Keane

Politics editor

It’s rare to see the Left and the Right reaching consensus, but it appears nothing can pull Australians together as much as the threat posed by Chinese property buyers.

Today Paul “Magic Water” Sheehan offered his take on the impact of Chinese buyers on the Sydney residential property market. He warned darkly in today’s Sydney Morning Herald:

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29 thoughts on “Chinese real estate invasion? Not according to the data, fellas

  1. paddy

    Thanks for this Bernard. I’ve been seeing so much hysteria on this issue, I was even beginning to believe it myself.
    Glad to see some actual facts, dispelling that nasty racist undertone so prevalent on the TV news.

  2. JMNO

    Some of it appears to be a planning issue when it comes to new investment. Towers and towers of glass with tiny one bedroom units have been built or have been approved for central Melbourne and foreign investors are targeted as purchasers and reportedly they snap them up. The towers of tacky units seem to justified on the grounds that we need this high density construction to house our fast-increasing population. There doesn’t seem to be much thinking at a planning level as to whether this is the best type of housing to construct. How many people want to live in a tiny one bed unit forever?

  3. Daly

    Thanks for facts, Bernard.

  4. Hugh (Charlie) McColl

    JMNO, hardly anyone lives in the same place forever. Clearly there is a market for one bedroom units in the inner city. If the owner doesn’t live in it, a tenant will. What’s the big deal?

  5. johnb78

    “How many people want to live in a tiny one bed unit forever?”

    Nobody. But a whole bunch want to live in the city in their 20s/early 30s, and are willing to accept a smaller unit in order to do so. Also workers who’ve moved on temporary contracts (from elsewhere in Australia or overseas), the newly divorced, and commuters with family in the outer suburbs and beyond buying a city flat to sleep in on weekdays.

  6. Tom Jones

    While there may be a degree of Xenophobia about Chinese investment in Australia it doesn’t explain all of the antipathy that is found. The billions spent year on year must make it harder for local buyers because it will keep prices higher and therefore less affordable for young people.

    There is also the cultural differences because while we understand New Zealanders (who are just as likely to be Maori as Pakeha) we cannot have the same certainty that it is Chinese individuals buying or whether there are other elements at play because China doesn’t have open policies about information. The article clearly outlines that there is a lot of money flowing into Australian Real Estate.

  7. Scott

    I like this comment in the report

    “The approved investment figures for off-the-plan approvals for developers and annual
    programs overstate the likely extent of actual foreign purchases. The value of
    investment reported against annual program approvals represents the maximum
    amount foreign persons may acquire under the program”

    The developer “off the plan” category is a dodgy measure as the developers themselves submit the application when proposing to market their off-the-plan developments to offshore interests. That is why the average application is worth over $100 million (as it involves groups of apartments, not just a single). No guarantee the offshore investor will buy them either as they have to market locally as well.

    So its a little bit of funny money going on in those three categories. If you remove them and just focus on the categories which have foreign investors wanting direct investment, you have an increase of 20% in volume and 60% in value over the year.

    Still small potatoes in the grand scheme of things, but there is a reason why the story is getting a run in the press. There has been an increase in foreign investment in real estate, and this is correlating with an increase in prices, though i’m sure consistantly low interest rates, and the reluctance to invest in bonds (which are destined to lose their value when interest rates start rising again) are more of a factor in this.

  8. CML

    I don’t care if it’s the Chinese, the North Americans or the Hottentots! NO ONE, who is not an Australian citizen, should be allowed to buy RESIDENTIAL real estate in Australia, for the simple reason that most other countries in the world do not allow non-citizens entry to their markets.
    Bet none of you could rock up in China and buy yourselves a residential property. Why do we have this idiot mentality of selling off everything that moves in Oz (and some things that don’t!!!)??
    The figures you quote Bernard, are just the thin edge of the wedge. Apart from greed, there is NO reason why Australian citizens should have to compete with cashed-up buyers from everywhere else in the world. Perhaps you will be happy when all the young people in this country are completely disenfranchised!!

  9. pierre

    Finally! Some balance in the ‘ethnic thievery’ housing debate! Seems to me, it’s a design to feed the ‘border protection’ theory, which I also see as flawed? x0x

  10. AR

    Anyone recall the dread of the Rising Yen in the 80s when the Japanese were expected to buy the world? Or at least the Gold Coast before the white shoe brigade could even clear the mangroves.

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