Chinese investment in Australian property could fall as much as $16b in 2017

Chinese buyers have turned off the Australian investment property market, with 43 per cent of Chinese agents surveyed by Investorist saying they would stop selling Australian property to their clients.

In 2016, Chinese investment reached a high of $31.9 billion and Investorist founder, Jon Ellis, expected it to drop to about up to $15 billion by the end of the year.

“The USA is [at the same level of investment] with us,” he said, comparing the attractiveness of the two markets. “And they’ve got Trump!”

Mr Ellis ballparked the figure, but said if nearly half of agents surveyed stopped selling Australian property to Chinese clients, such a drop was possible.

“The important thing is demand from clients but those agents have the ability to influence the buyers.”

Mr Ellis’s prediction was a worst case scenario from the data he had received, and other pundits were less sure of a potential $16 billion drop. 

Melbourne-based ACproperty and Sodichan director Esther Yong said there may be a slow down but investment from China was now a fixture in the Australian economy. 

“They’re still interested in Australia, they just want to see what would happen next,” Ms Yong said. “What I feel personally is that the issue in China is bigger than the issues we’re seeing here.”

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Shane Oliver, AMP Capital chief economist, said the biggest concern would be Chinese perceptions of specific markets in Australia. He said if Chinese investors viewed Sydney and Melbourne markets as overheated, they may be less willing to spend money in those cities. 

“If that happens, they might just say, ‘let’s look to Brisbane and the Gold Coast,” Dr Oliver said. 

But that’s if they can get money out of the country at all. Capital outflow restrictions made by Beijing would make buying foreign property more difficult for Chinese investors, but not impossible. Mr Ellis said other solutions would be needed to get foreign money into Australia.

He said Australian banks had cracked down on foreign lending too, and if that wasn’t enough, most state governments had imposed new taxes on top of federal government measures to crack down on foreign ownership. The vacant property fee imposed by the Turnbull Government by itself would also have discouraged Chinese buyers, Mr Ellis said. 

“We might find that there are many many more non-bank lenders entering the market and we’re flushed with cash, and that could change the market completely,” said Mr Ellis. “That could happen overnight, China changes really quickly.”

Mr Ellis said their reasoning was down to a mix of political and economic conditions that made buying here more difficult.

“It’s very complicated, there are many other factors,” he said. “However, it indicates that you’re going to have somewhere in that ballpark of reduction in demand.”

Ms Yong was certain Chinese buyers would look for other ways to get money out of the country. She said it wasn’t just about owning the property; it was about getting money out of a potentially unstable political climate. 

“If they don’t move their money out of China, they’ll lose money,” she said.

When new methods of getting cash out of China are found, Mr Ellis said Brisbane was best positioned to take advantage of a renewed Chinese interest in Australian property.

“The Queensland government has been smart, they haven’t levied any more stamp duties,” he said. “There’s lots of opportunities for this state to make money and they haven’t decided to levy that on real estate and I think that’s a great opportunity for the state.”

Dr Oliver agreed that cities other than Sydney and Melbourne could benefit, but said $16 billion out of the property market wouldn’t be the end of the world. 

“It sounds like a big number, a huge slump but just bear in mind, relative to the size of the economy, it’s not a huge amount,” he said. “In my view it’ll just be directed to other cities.”