Victorian foreign buyer tax doing little to deter Chinese buyers, data suggests

The Victorian government’s new foreign buyer tax has so far done little to deter Chinese investment, new data suggests.

Figures from the Chinese international property website Juwai.com show that strong year-on-year interest continued over the June quarter. Its Purchasing Intent Index, a tool used to monitor Chinese buyer interest in specific locations, was up 92 per cent from the same quarter last year.

​Despite Melbourne performing well in annual growth, a modest decline of 6 per cent was recorded from the first to second quarter of 2015.

Victoria also experienced a slightly larger drop of 13.6 per cent from the first quarter, but interest was still up 73.6 per cent from the same period as last year.

In comparison, Queensland has only grown by 17 per cent in the time frame. 

Juwai CEO Andrew Taylor says the decline is a cooling off from an abnormally large amount of interest in the first quarter which coincided with Chinese New Year celebrations.

Mr Taylor said Juwai experienced a large increase in interest prior to Chinese New Year holiday and then a surge once the festival concluded. 

“We saw a massive peak, bigger than ever before in quarter one in interest in Australia, so you can’t always keep something going up all the time,” Mr Taylor said. 

“A lot of Chinese travelled to Australia [for the holiday] and loved what they saw. Then they came back and did a bit of research and that’s why March was absolutely gangbusters for us.” 

In May the state government announced a 3 per cent tax for the purchase price of a property for non-residential buyers.

At the time the new taxes were described as “king hit” to the real estate industry, but, despite Juwai’s latest property figures being collected prior to the taxes coming into effect, Mr Taylor says there are no signs to suggest that Chinese buyers have been deterred.

In fact, Mr Taylor says having tax in place makes the market more appealing to Chinese buyers because it reminds them Australia is a regulated market.

The falling Australian dollar also means that any tax paid is offset by better value for the dollar. 

“Thanks to the Aussie dollar falling and the tax increase, it is actually almost like a big extra green tick rather than anything else” Mr Taylor said.

Chinese buyers are also prepared to pay more for housing in Victoria, with average price jumping from $637,286 in first quarter to $772,359 in the June quarter.

“Chinese consumers have a little bit more liquidity and can actually withstand the price increases,” Mr Taylor said.