​Chinese credit restrictions drive Australian investment

by 13 Jan 2014
Foreign investment in Australian property continues to grow as China faces a record drop in new credit levels.

China’s cabinet recently imposed new controls on the nation’s shadow-banking industry, targeting off-the-books loans.

Estimates and data compiled by Bloomberg approximate new credit in China fell by as much as 931 billion yuan (A$171 billion) in the second half of 2013, the biggest drop since figures began in 2002.

Pepper Home Loans predicts the restricted environment in China could lead to an increase in investment in Australian property.

“Australia represents the perfect place for Chinese investors to obtain finance for real estate purchases,” said a statement on the lender’s website. “This means lenders throughout the country are likely seeing increased activity from foreign buyers, and will continue to do so for the foreseeable future.”

According to estimates by the Chinese-language Juwai web portal Chinese investors spent a total of 5.4 billion yuan (A$992 million) buying houses in Australia as of the end of 2013.

The site estimated that 63.1 million Chinese possessed the financial capacity to purchase housing overseas and that these people were conducting some 90 million searches online for housing every month.
Aviate managing director Neil Smoi said earlier this year foreign investors purchasing residential property in Australia is having an increasingly pronounced impact.

“The relatively simple path for overseas investors to purchase property in Australia can be expected to come under further scrutiny, particularly given the falling number of first home buyers in the market at the moment," said Smoli.

"It is difficult to see any real respite for first home buyers from an affordability perspective, hence we expect loans to investors to continue to outstrip those to first home buyers over the next 12 months."

The gradual increase in the proportion of loans arranged for investors has risen steadily in recent times. Where investors would typically account for 20%-30% of new mortgages, the aggregation groups Aviate is aligned with now suggest this proportion is just shy of 40% and could potentially rise further