Falling Chinese demand for Aussie real estate

by AB27 Jan 2016
Deteriorating economic conditions and tighter regulations could result in a fall in the amount of Chinese money directed at Australian real estate.

According to a report in the Australian Financial Review, those selling real estate in Australia could be the ones to pay the price for the recent poor performance of the Chinese share market and efforts by the Chinese government to halt the underground flow of capital from the Asian super-power.

Richard Yuan, head Australia China Entrepreneurs Club told the AFR demand for Australian real estate remains, but investors may no longer have the means to go through with purchases.

“The desire to buy is there but they now have less disposable income,” Yuan told the AFR.

KPMG Asia Business Group leader Doug Ferguson told the AFR conditions in China could hurt real estate in Australia, particularly the unit market; however, the fact that there are so many potential investors in China means the effects could be mitigated.

"There could be a short-term problem, especially with the purchase of apartments. Still, we have to bear in mind China has a large number of buyers that could sustain demand despite the tightening,” Ferguson told the AFR.

While Ferguson and others told the AFR that the economic woes in China may have only a minimal effect on real estate here, there have already been a number of predictions that 2016 may be a down year for Chinese investment in the market.

Credit Suisse analysts Damien Boey and Hasan Tevfik last year predicted Chinese demand for global real estate could fall by 30%.

“The underlying issue is weakness in the Chinese economy,” they said in November.
"Capital flight is tightening credit conditions, which in turn is dampening income growth, wealth and the purchasing power of Chinese residents.
"All things considered, the likelihood is that Chinese flows into the Australian property market have flattened out in 2015.”

John McGrath, chief executive officer of McGrath Real Estate, said decreased interest in Australian real estate by Chinese investors was already visible last year.

“[They] are still there, but it is probably back 10 or 15% from where they were a year ago,” McGrath told Bloomberg News in November.

“I think there is a whole combination of things there. The Chinese stock market and so forth,” he said.