Foreign investor demand to plummet, research suggests

by AB06 Nov 2015
The number of Chinese investors looking to buy Australian property could be on the downturn, research from banking giant Credit Suisse has suggested.
 
According to reports in Fairfax media outlets this week, a research note from Credit Suisse analysts Damien Boey and Hasan Tevfik suggests demand for offshore property among Chines buyers could decrease by nearly a third as economic conditions in the Asian superpower worsen.
 
"Chinese demand for global property could fall by 30 per cent,” Boey and Tevfik reportedly wrote.
 
"The underlying issue is weakness in the Chinese economy.
 
"Capital flight is tightening credit conditions, which in turn is dampening income growth, wealth and the purchasing power of Chinese residents."
 
The issue of Chinese investors buying Australian property became a contentious one earlier this year, helped by a number of high-profile Foreign Investment Review Board breaches, but Boey and Tevfik believe there is a change of momentum already occurring.
 
"All things considered, the likelihood is that Chinese flows into the Australian property market have flattened out in 2015,” they wrote.
 
Rich Harvey, managing director of buyer’s agency Property Buyer, said a drop off in foreign investors buying real estate could have positives and negatives for the market.
 
“Foreign buyers play an important role in the market, so we want to encourage them to participate, but it is important that it’s an appropriate level of participation,” Harvey said.
 
“It’s probably a good thing we’re seeing some moderation. Foreign investors often target one type of property in one area which can lead to oversupply and other issues,” he said.
 
Because of FIRB regulations which stipulate foreign buyers need to purchase new properties, off the plan purchases are popular with foreign buyers and Harvey believes that could pose some issues in the near future.
 
“I think we might see some difficulty soon for foreign buyers who have purchased off the plan and when it comes time to settle their LVR has gone from 80% to 70% and they have to come up with the extra 10% for the purchase.”
 

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