by John McGrath

Newly released stats from Australia’s Foreign Investment Review Board show China has become our number one source of international buyers, with $5.93 billion invested in residential and commercial real estate in the 2013 financial year. This includes:

  • Money invested by Chinese developers on new developments
  • Homes purchased by Chinese families moving here via the normal immigration process or with the help of the Significant Investor Visa Program
  • Homes purchased by the families of Chinese university students studying here under a temporary visa
  • Purchases of newly-built or off-the-plan properties for investment, which international purchasers living overseas can buy relatively freely under FIRB rules

The $5.93 billion invested in FY13 is a significant jump on previous years – up 42% on the $4.19 billion spent by Chinese buyers in FY12 and up even more – by 145% on the $2.42 billion spent in FY10.

Clearly, the Chinese are loving Australian property right now and there’s a number of reasons for it:

  1. Our economic resilience during the GFC, which put us in the spotlight on the world stage
  2. A long term history of reliable growth in most property markets
  3. Political stability
  4. Our large resident Asian community
  5. Our world-class schools and universities (education is highly valued in Chinese culture)
  6. We’re in the same business time zone, enabling our new Chinese residents to easily commute

Back home in China, investors are increasingly concerned about a perceived price bubble; an oversupply of new apartments; and the future quality of their food and air supply due to mass industrialisation. To prevent a bubble burst, the Chinese government restricted investment and this has led to many newly wealthy middle class Chinese buyers looking for opportunities in other countries like ours.

Add to this the relatively new Significant Investor Visa, which has been a major hit with wealthy Chinese families who can invest $5M in approved assets to gain expedited residency and therefore the opportunity to invest in as much new or established real estate as they want.  Latest stats show 90% of SIV applications are from Chinese citizens, according to the Immigration Department, and Victoria is the most popular destination.

I’m also expecting more demand from Chinese buyers following Canada’s decision to scrap its own version of the SIV, which was very popular with the Chinese.

All of these factors add up to ongoing – and likely increasing; demand from Chinese buyers. 

A couple of weeks ago, the Federal Government announced a parliamentary inquiry into foreign investment in real estate off the back of concerns that Chinese demand in particular, is creating a hurdle for Australian buyers in the property market – particularly first home buyers.  

Most mainland Chinese buyers fit into one of the following categories:

  • Chinese developers – creating more accommodation for Australian buyers
  • Wealthy Chinese families moving here on approved visas and buying prestige real estate
  • Skilled labour immigrants who we need to fill important jobs, who are attaining residency via the normal channels and want to buy a home and maybe some investments too
  • The parents of Chinese students studying in Australia on temporary visas, who are only allowed to purchase one property for the student to live in and it must be sold once they leave 
  • China-based investors purchasing newly-built apartments or off-the-plan stock for investment

There are many favourable aspects to rising Chinese demand – in particular, the resulting new apartment developments that are creating jobs and firing up our construction sector, which has been struggling for many years.

It’s also important to note that Chinese buyers are not buying in every market. Typically, when they first arrive they gravitate towards specific neighbourhoods where other immigrants are based so they can join an established community. In Sydney, there are approximately 12 popular Chinese hubs - suburbs such as Hornsby, Epping, Eastwood, Chatswood, Parramatta, Ryde, Haymarket, Burwood, Ultimo, Kensington, Campsie and Hurstville.

And remember, just because someone is of Asian appearance doesn’t mean they are from Asia. I have a feeling that some agents are reporting sales to ‘Chinese buyers’ because their clients look Chinese, when they are actually Australians with a Chinese heritage. There’s a big difference between demand for housing from these buyers and demand from mainland Chinese investors.