Chinese buyers are starting to disappear from Australia’s property market

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Chinese buyers are starting to disappear from Australia's property market Chinese buyers are starting to disappear from Australia’s property market China fleeing 300x169

Chinese property buyers are turning away from Australian housing
as efforts by regulators in both countries to slow investment
begin to bite.

Chinese buyers, who make up about 80 per cent of all foreign
property purchases in Australia, have grown wary after being hit
by Beijing’s tightened capital controls, local banks restricting
lending and growing fears of an over-supply in the capital city
apartment market.

The drop-off in Chinese demand for Australian property marks a
noticeable shift from just a year ago when buyers from the
mainland were seen to be dominating apartment purchases in many
inner city suburbs.

“It was just 12 months ago that Australia was the hottest thing
at Chinese property exhibitions,” said Scott Kirchner, a
Shanghai-based director of Beller Group, a real estate agency.

“Now Australian developers are not up here pushing projects and
Chinese agents have no appetite for Australian property.”

That downbeat assessment is mirrored by figures released from
Chinese-language property portal Juwai.com, which showed searches
on Australian property were down one-third in the first half of
the year, compared to the second half of last year.

Focus shifts to other countries

“Some Chinese buyers have clearly shifted their focus from
Australia to other countries. Australia has lost market share,”
said Jane Lu, the portal’s Australian head.

She said new property taxes, restrictions from Australian banks
lending to foreign buyers and tighter Chinese capital controls
had all played a part.

“Chinese capital controls have contributed to the constrained
environment and made inexpensive countries like Thailand look
more appealing,” Ms Lu said.

In an effort to keep the Chinese yuan from depreciating sharply,
Beijing has progressively tightened oversight around individuals
and companies moving money offshore following record capital
outflows last year.

This has involved stopping people pooling their annual $US50,000
($63,300) foreign currency quota to make a purchase and greater
over-sight of offshore fund transfers.

“They could probably find a way around the capital controls but
at the moment buyers are not inclined to for Australian
property,” Mr Kirchner said.

Mr Kirchner said Malaysia and Britain were also increasingly
popular among Chinese buyers.

Ms Lu from Juwai said Chinese purchases in Australia could be
down between 10 and 30 per cent this year.

But she stressed this should be seen in the context of a record
2016 for Chinese buyers in Australia. Even if Chinese buyers
dropped by a third in 2017, she said, it still could be the
second best year on record.

“Australia is still secure in its position as the second-most
popular country for Chinese buyers.

“When you compare the price of similar property in Australia and
China, Australia still offers good value. It looks cheap to
them,” Ms Lu said.

“But they feel that the Australian governments don’t want them
here.”

Juwai said if you compared the first half of this year to the
same period last year, inquiries in Australia were down 9.7 per
cent. However, global inquiries were up 8.7 per cent over the
same time frame.

The issue for Australian developers and the market more broadly
is that the drop-off in Chinese interest comes at the same time
as a record number of new apartments are due to hit the market
over the next year.

Turnaround follows record 2016

The big turnaround in sentiment comes after a record 2016 for
Chinese residential property purchases.

According to figures compiled by Credit Suisse, foreign buyers
accounted for 25 per cent of all new home purchases in NSW in the
second half of last year and 16 per cent in Victoria.

Chinese buyers make up about 80 per cent of all foreign property
purchases in Australia.

Using approval figures from Foreign Investment Review Board,
Morgan Stanley estimated $20 billion worth of Chinese investment
poured into Australian residential property in the 2016 financial
year.

“We believe a further tightening of capital controls will have a
further negative impact on Chinese investment in residential
[property] in Australia – both end product and development land,”
the investment bank said in a report last month.

China’s capital controls are not just affecting Australia’s
residential property market. There is concern Beijing’s moves to
contain capital flight, which includes a crackdown on big
overseas acquisitions by Chinese firms, could affect demand for
Australian real estate, agriculture and infrastructure assets.
Since 2007, Australia has received $US90 billion in Chinese
investment, putting it second only to the US, according to KPMG.

Over the past few years, Chinese buyers have injected price
tension into sales processes for everything from apartment
blocks, office towers, mines, ports, cattle stations and dairy
farms.

However, after a spate of high-profile overseas deals, Beijing
has tightened its scrutiny of acquisitions by state-owned
enterprises and ordered banks to review their exposure to some of
the country’s most acquisitive firms.

One of those companies, property giant Dalian Wanda Group, last
week announced a restructure of its two flagship Australian
projects in Sydney and on the Gold Coast. This is being viewed by
many as the first step in a sale by Wanda, which is under
pressure to crimp its overseas expansion and reduce debt.

This article first appeared at AFR.com. See the original article here.

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