Investor crackdown not deterring foreign investors

by Julia Corderoy08 Jul 2015
The tightening regulation around investor loans is not having a significant impact on demand from Chinese foreign investors, according to a Sydney brokerage.

Alliance Mortgage Solutions, who have a speciality in servicing the Chinese community at home and abroad, told Australian Broker that they haven't seen, or foresee, any significant decrease in Chinese foreign investment since lenders announced changes to their investment loan qualifications.

According to Alliance’s home loan data, the total value of home loan settled in April to overseas buyers – before lenders implemented tougher policies – made up approximately 27%. In May, after lenders announced new rules, the overseas settlement portion was approximately 26.4%. In June, overseas investors made up approximately 26%.

Donald Tang, sales director of Alliance Mortgage Solutions says it may make Chinese investors less hasty when it comes to investing in Australian property, but it won’t cause a decrease. 

“We received information from some of our real estate partners that there was a slight decrease in recent sales of off-the-plan property… but the decrease does not mean Chinese investors will reduce the demand towards purchasing property. The changes to investor loans may have resulted in a small portion of customers just adopting a wait-and-see attitude,” he told Australian Broker.

In fact, Tang says the exchange rate will cover any further costs the new rules might add to purchasing Australian property.

“The exchange rate between Chinese RMB and Australia Dollars fluctuates rapidly. According Bank of China records, on 30 June 2014, the exchange rate of the Australian Dollar to Chinese RMB reached 1:5.83. On 30 June 2015, the exchange rate decreased to 1:4.75.

“From 2014 to 2015, the value of Australian Dollar decreased by 18.52% when comparing the Australian Dollar to Chinese RMB. The decreased value of the Australian Dollar increased the purchasing power of Chinese investors by 18.52% it the mean time. Even with the stricter rules implemented, the increased percentage of purchasing power of Chinese RMB from Chinese investors will cover the additional deposit that they might need to pay for the new property.”

Further, due to the strength of the Chinese stock market, Tang says Chinese investors have “hot money” they are ready to spend.

“The Chinese Stock Market is experiencing a booming period. Take April as example, where the accumulated total exchange amount of Shanghai & Shenzhen Stock was approximately 710 trillion RMB. Comparing this to the same period of the previous year, the amount in 2015 increased 355.1%,” he told Australian Broker.

“As a result, the stock market boom benefits short-term Chinese investors, so that the ‘hot money’ they hold on hand increases rapidly. Although, the Australian Investment Policy has been changed, Chinese investors are still doing global purchasing.”
 

COMMENTS

  • by Lorraine 8/07/2015 9:52:04 AM

    I had to double check when this article was written with all the references to the 'strong' and 'booming' Chinese stock market!!!
    If you haven't noticed their stock market is collapsing, having wiped $3.2 trillion from the value of Chinese shares in just three weeks.