Chinese buyers snapping up Australian residential real estate
Property prices in Sydney and elsewhere around the country are being fuelled, at least in part, by a surge in Chinese buyer activity that is set to take off even further throughout 2023.
A thawing of icy relations with China has seen Australia emerge at the top of the list of favourite countries for Chinese property buyers.
Chinese investment in Australian real estate is set to soar throughout the rest of 2023, with investors attracted to its stable economy, attractive lifestyle and potential for long-term returns.
Demand from foreign buyers overall has risen to a market share of 7.9 per cent, driven mainly by an influx of buyers to New South Wales. In the first quarter of this year NSW saw a steep increase in foreign buyer activity in residential real estate, accounting for 16.2 per cent of all sales, compared to a two-year low of just 4.0 per cent in Victoria.
The share of foreign buyers also increased in Western Australia (7.9 per cent) and Queensland (7.5 per cent).
But it’s Chinese buyers making the biggest impact, as cashed up post-Covid bank balances are directed towards investments overseas.
Foreign Investment Review Board data showed China was the single largest source of offshore investment in Australian residential real estate in the fourth quarter of last year at $600 million.
Chinese households added more than US$2.6 trillion to their bank balances in 2022. Their bank deposits now exceed US$18 trillion. That’s larger than the country’s entire gross domestic product and is 11 per cent higher than would be expected from pre-pandemic trends, according to analysts.
Juwai IQI Co-Founder and Group Managing Director Daniel Ho told API Magazine that Australia is the most popular destination in 2023 because it is much safer than the United States, has no estate duty, is an easy place for older new residents to obtain health insurance, and offers a relatively easy pathway to permanent residency for students and workers.
“Buyer enquiries in first three months are 127 per cent higher than in the previous quarter,” Mr Ho said.
“We expect Chinese investment in Australian real estate to climb at least 30 per cent in 2023 compared to 2022.
“Chinese buyers are back, and more will come in the second half of the year than in the ﬁrst.
“The ultimate scale of the new investment will depend on how quickly and how far flights and travel links are restored between the two countries, as flights are one of the primary obstacles at the moment.”
In terms of buyer enquiries, Australia has now overtaken Thailand, which had been in the number one spot for four years, and the US, which had been in second place ahead of Australia for the past two years.
While big spending buyers are targeting three and four-bedroom homes in Sydney, smaller student accommodation apartments around Australia are also popular Chinese investments.
“Chinese buyers are looking overseas for higher returns than they can obtain in their domestic housing or stock markets,” Mr Ho said.
“Economists say that, before the pandemic, Chinese moved about US$150 billion overseas annually, but that will probably be higher in 2023 and 2024 due to catch-up activity after three years of lockdowns.”
Sydney property price push
About one-third of Chinese buyer enquiries in Australia go to Melbourne, while about one-quarter go to Sydney and one-ﬁfth each to Perth and Brisbane, according to Juwai IQI buyer enquiry data.
Sydney’s property market turnaround has to some degree been fuelled by the return of Chinese investors.
John McGrath, Managing Director and CEO, McGrath, said demand from Chinese buyers is rising across all price brackets.
“We have seen a strong bounce-back, especially in the last three to four months”, McGrath said on Tuesday (22 May).
“A lot of people are wanting to park their currency in Australian dollars and in a safe and stable political environment,” he said.
Chinese buyers are generally focused on well-selected locations that tend to increase in value, driven by factors such as population growth, limited housing supply, and infrastructure development.
Mr McGrath said China is the biggest source country for residential investment, followed by Hong Kong, Vietnam, the United Kingdom and Singapore.
“The bounce-back in international buying activity overall is strong and significant this year. Following the pandemic, a lot of people are wanting to park their currency in Australian dollars and in a safe and stable political environment.
“Most overseas buyers of Australian property have significant wealth behind them. In particular, we are seeing a lot of buyers from China either paying cash or with relatively small loans.
“Cash buyers obviously aren’t concerned about rising interest rates. Their investment decisions are much more about long-term security and strong returns.
“Some people are selling their properties in overseas locations and redeploying those funds in Australia.”
Property pathway to residency
Foreign buyers can apply to purchase new properties, and can apply to buy an existing property if they will redevelop it and add to the housing stock, or if they are a temporary resident who will live there while in Australia. Permanent residents are free to purchase property.
For Chinese investors seeking to relocate to Australia, property ownership can serve as a pathway to permanent residency.
The Australian government offers various visa programs, such as the Business Innovation and Investment Program, which provide opportunities for individuals who invest in Australian businesses or meet specific investment thresholds. By investing in real estate, Chinese buyers can meet the criteria for these visa programs and potentially secure long-term residency in Australia.
In an attempt to rein in property prices and reduce the number of homes sitting vacant, Canada recently took the major step of banning foreigners from buying residential property, a move unlikely to be replicated in Australia.