Chinese property buyers targeting schools, public transport
Foreign investment in Australian property has fallen but real estate professionals are reporting a major upturn in enquiries from Chinese buyers, who are the biggest investors in residential real estate.
As China’s President Xi Jinping began his third term as head of state China also marked its third successive year as the biggest source of foreign investment in Australian residential property.
China was the largest source of investment for residential real estate investment proposals by number and value ($0.6 billion), as it was in 2021-22 and 2020-21. The next two largest sources of residential investment were Hong Kong ($0.1 billion) and Vietnam ($0.1 billion).
The investment figures were recently released by the Australian Government’s Treasury in its Quarterly Report on Foreign Investment and cover the last quarter of 2022.
Total foreign investment in Australia fell sharply but Chinese buyers remained the most significant, with $600 million of approved investment, even though that was down $1 billion.
With Hong Kong investment included in the Chinese total, Chinese investment this quarter accounted for $700 million of Australian property. After China, the next largest investors were Vietnam, Singapore, and the United Kingdom, each of which invested $100 million in residential real estate.
In this quarter, the largest target sector for proposed investment for the quarter by value was commercial real estate, with a total value of $19.3 billion.
The United States was the largest source country for commercial investment proposals by number and value ($16.7 billion), as it was in 2021-22 and 2020-21. The next four largest source countries by value were China ($6.7 billion), Singapore ($5.2 billion), South Korea ($4.2 billion) and Canada ($3.8 billion).
While the overall numbers are down, the return of Chinese students to Australia, an end to pandemic travel bans and warming relations between the two countries are driving a rise in property enquiries from China.
Juwai IQI Co-Founder and Group Managing Director Daniel Ho said that at the current rate, China would invest an estimated $3.2 billion in Australian residential real estate this year, which would be up from $2.4 billion in 2021-22.
With the inclusion of Hong Kong, China would invest $3.8 billion, which would be up from $3 billion last year.
“In 2022 and so far this year, Australia is the most popular country for Chinese homebuyers, for the first time ever, according to Juwai IQI Chinese buyer enquiries,” Mr Ho said.
“In January, Chinese buyer enquiries for Australian real estate surged by 24 per cent compared to December, due to the announcement that borders would be reopening.”
Prior to 2020 residential and commercial property foreign investment was not identified separately.
Chinese interest in Aussie property rising
Real estate agents with sizeable proportions of Chinese buyers are reporting a major upturn in enquiries from China.
Jeremy Desmier, Executive Chairman & Auctioneer, Fletchers, said the Chinese buyer market never went away during the pandemic years but with borders closed there was a slowdown of international buyers that is now reversing.
“New immigrants require a certain visa status, whereby they can own a property as their principal place of residence as long as they reside in it, and this sector of the market definitely slowed but there was still significant buyer activity from buyers of Chinese origin who live in Australia with permanent residency status,” Mr Desmier told API Magazine.
“We have definitely seen a resurgence of buyers immigrating from overseas in recent months for existing residential properties since borders reopened.”
Mr Desmier did, however, say that the expected influx of Chinese students, particularly to Melbourne and Sydney, would not have a significant impact on local property sales and prices.
“I believe this probably has more impact on the rental market than sales.
“I know some families do fund their children’s accommodation purchases while they live here as international students but I believe this would only represent a small percentage compared to those who rent.”
Fiona Yang, Executive Partner at Plus Agency, a project marketing agency with offices in Chatswood and Shanghai, argued that the soaring rents and lack of rental properties was driving more Chinese to buy rather than rent.
“We have five times more Chinese buyers than before and they want to buy quickly.
“The pandemic-related uncertainty is past, the closed borders are open, rents are hot, and these buyers are fed up with three years of lockdown.
“They are committed to Australia and they are ready to make quick decisions on real estate.
“Just in the first two months of this year, our 10 agents have exchanged unconditional contracts on 24 residences, compared to 19 in the first two months of 2022 and 11 in 2021.
“In Ashfield, we are selling off-the-plan units for which there is no display apartment, no sales office, and hardly any marketing material, and all we can do is show them a construction site, and still they are buying.”
Australia can also expect some degree of added interest in the wake of Canada banning foreigners from buying residential property, in an attempt to rein in property prices and reduce the number of homes sitting vacant.
Families reuniting, avoiding rent
Ms Yang said that before the pandemic, satellite families were the norm but their collective mindset was changing.
“Satellite families have decided to stop splitting themselves between countries and are moving to Australia permanently.
“Previously, one parent and the children would live in Australia while the children went to school, and the other parent would be back in China working to pay the bills.
“Rents are very high, so these families want to get into their own homes as quickly as possible and the hot rental market gives them confidence in their purchases.
“Most have lived in China for the past three years, so they can’t buy an existing home – they have to buy a new home.”
Mr Desmier said family homes in attractive school zones and close to public transport were attracting premium interest from Chinese immigrants.
“One Chinese client explained to me that as a multi-generational family, the grandparents from China rarely drive, so public transport is a must.
“They get the children to school, so walking distance is also vital and we’ve seen that within a 500 metre radius of schools is attracting a real price premium as a result.
He said that traditionally the hottest segment of the market in Melbourne’s eastern suburbs among Chinese buyers had been land for the purpose of building a new home but the building industry’s woes have shifted that sentiment.
“While there is still interest in land, inflated building costs, uncertainty in the building sector and long wait times have seen many buyers look for properties that are new or near-new.
“Newly built properties are probably the strongest market segment at the moment for these reasons, whereas land value properties have shown the biggest decline in the inner east for the aforementioned reasons.”