Foreign investment concerns not unique to Australia

by AB30 Mar 2016
Concern about the impact foreign money has on house prices is not unique to Australia, with Canada’s central bank expressing concern about how the flow of foreign capital into the country’s real estate market is being tracked.

According to a Bloomberg report last week, calculations by Peter Routledge, a financial analyst at the National Bank of Canada, suggest that Chinese investors purchased C$12.7 billion worth of residential real estate in the Canadian city of Vancouver in 2015, which represents 33% of the total C$38.5 billion sold in the year.

In Toronto, Chinese buyers are estimated to have accounted for 14% of purchases, or about C$9 billion of the C$63 billion worth of sales that happened in 2015.

The analysis came days after the Canadian government announced it will spend C$500,000 over the coming year to research foreign buyers, an amount Routledge suggested will likely do little to give the country a better understanding of the scope of foreign investment.

"Investing only 25.7% of the cost of an average price of a detached home in Vancouver is, at the very least, a touch on the low side," Routledge was quoted as saying by Bloomberg.

Charles Pittar, chief executive officer of Juwai.com, an online platform that markets Australian real estate to Chinese buyers, told Australian Broker's sister publication, Your Investment Property, that governments should be committed to providing information about foreign buyers as it would help clear misconceptions about their impacts on housing markets.

“We’ve always advocated better information gathering. At Juwai.com, we think more transparency will help Australians realise how important offshore investment is, and how beneficial it is,” Pittar told Your Investment Property Magazine.

“The recent Parliamentary inquiry looked into offshore real estate investment and concluded it was ‘vital’ to improving supply and moderating price gains and affordability,” he said.

In Australia the latest official figures on foreign buyers are from the Foreign Investment Review Board’s 2013-14 financial year report; however a Treasury department spokesperson said the 2014-15 report will be released “shortly.”

While recent government figures aren’t available, Pittar said market research shows Chines buyers do account for a significant portion of Australian real estate.

“Credit Suisse believes that Chinese buyers account for 15% of all new home buying today, and will account for about 20% by 2020. Meriton stated that foreign buyers make up about 13% of buyers of its new units. There are premium agents in particular markets like Mosman for whom Chinese make up about half of all buyers,” he said.

"In Melbourne, the NAB says about 30 per cent of apartment sales are from overseas buyers. It’s an important market, which nobody should overlook.”

Pittar said those levels are likely to increase in coming years, with their being no sign of Australian real estate losing its attraction to buyers from the Asian superpower.

“We don’t see any indication that Chinese are losing interest in Australian property. Quite the opposite, we expect Chinese investment in Australian real estate to set new records by 2020. All the push factors are still in place. China has a vast amount of pent-up demand for international real estate. As their second most popular market, Australia stands to benefit from the immense growth in Chinese international investment that will take place in the coming years.

“In February, our users made 39.7% more buying enquiries to property sellers than a year earlier, which suggests that the trend is up."