New data analysing Australia’s property market trends in the last three months has revealed foreign investors are dominating the country’s real estate scene, but it’s not for the reasons you may expect.
The nation’s housing market has experienced a 2.7 per cent jump in the number of new properties being purchased by international buyers in the first quarter of this year.
Consequently, the market share for this category now sits at 7.9 per cent despite a two-year low of 4 per cent in Victoria, the first NAB residential Property Survey for 2023 highlights.
Of this number, real estate experts believe about half are Chinese buyers, with a small portion from the southeast Asian countries of Malaysia, Indonesia and Vietnam.
And while their presence is increasing competition in some areas of the property market, two experts have revealed the surprising reasons these investors have chosen to buy a stake in Australia’s housing scene.
Foreign buyers are flocking to Australia in droves. Picture: Stephen Cooper
Why Chinese buyers are choosing Australia
Peter Li, principal of the Plus Agency in Sydney, says there are three reasons why Australia’s property market is so attractive to Asian buyers.
The first and most obvious factor is the country’s education opportunities, with the boutique Sydney Residential Projects specialist using his own migration story as an example.
“Mum and dad just suddenly kicked me out of my house and they said ‘go to Australia’ … so I came here for school, and then when I finished school, I helped my parents migrate and I got married and got a job here,” he said.
“So for me, I bought a property and I bought a property for mum and dad.”
The Chinese community that’s been established in parts of Australia is another element drawing foreign buyers to the country.
But the most surprising factor which entices this group to choose Australia is the minor time zone difference between AEST and the time in Asia.
“Melbourne, Canberra, Sydney and China are only about two hours apart,” Mr Li explained.
“So if they‘re buying a property and have a business running, the UK or the US is going to be harder to manage because there is a larger time difference.”
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Sydney’s inner city suburbs and surrounds are of particular interest. Picture: NCA NewsWire / David Swift
Reason behind the current influx of interest in Australia
A combination of China scrapping its harsh Covid-19 restrictions, the timing of the pandemic itself and tourism has created a large interest in Australia, Mr Li said.
The strict lockdown measures imposed by the Chinese government meant relatives spent years not seeing members of their family who lived internationally, with many becoming fed up with their way of life.
As a result, when the borders did finally open, tourists who came to Australia got a taste of a “better life” which influenced their decision to migrate here permanently.
Secondly, Mr Li explained the staggering number of investors purchasing homes in Australia now is a result of “overdue” interest.
“The transaction really dropped down during lockdown but now people can start inspecting properties again and they can start seeing these properties and just start buying them.”
Meanwhile, co-founder of Asian property listing company Juwai IQI Daniel Ho, said “revenge spending” has also played a role in increased demand.
“In China, they talk of ‘revenge spending’ as people who splurge on all the things they couldn’t buy during the lockdowns,” he said.
“Real estate in Australia might be the ultimate revenge purchase.
“People in Australia complain about the lockdowns, and Melbourne underwent six lockdowns totalling 262 days. Well, China’s borders have been closed for three years. They want to make up for lost time.”
Peter Li, Principal of the Plus Agency in Sydney. Picture: Supplied
Where foreign investors are buying
From a Sydney point of view, Mr Li said the areas Chinese buyers are interested in depends on the age and demographic of the purchaser.
He explained that this group usually looks for properties that have a land component, particularly if they’re young and are looking to start a family.
Alternatively, there’s also interest in townhouses or duplexes in the CBD and surrounding suburbs due to it being close to work and education facilities.
“Chinese buyers are very postcode conscious,” Mr Li said.
Some inner-city suburbs of interest for young people include Rhodes, Meadowbank, Zetland, Waterloo and Macquarie Park.
Meanwhile the older generations tend to reside in Chatswood, in the state’s North Shore and Hurstville for the “convenience and food”.
Mr Li also added most buyers live in the properties they purchase opposed to renting them out, with 70 to 80 per cent of the agent’s sales purchased by owner occupiers.
As for interstate properties, Mr Ho said: “About one-third of Chinese buyer inquiries go to Melbourne … and one-fifth each to Perth and Brisbane. That‘s according to Juwai IQI buyer inquiries”.
Australia has remained within the top 5 places Chinese buyers like to purchase for the last five years. Picture: Juwai IQI
Why some buyers can afford multimillion-dollar properties
It’s hard to not feel gobsmacked when competing against a Chinese buyer in a bid for a home, particularly when you’re on a budget – or at least that was my experience.
Unlike most low to middle-income earning Australians, some Chinese buyers can afford to bid above the asking price particularly when purchasing in areas where the median house price is below one million.
Mr Li explained Chinese immigrants moving from wealthy cities like Beijing, Shanghai or Hong Kong can receive between two to five million for their property, which they will then put towards a new home in Australia.
Because of this large bracket they can afford to pay more for a property or buy a house in a richer suburb.
The same can’t be said for migrants moving from Vietnam or Thailand, as property values in those nations are lower.
Chinese buyers moving from Shanghai or Hong Kong can afford to splurge. Picture NCA NewsWire / Seb Haggett
Mr Ling said most Chinese buyers still need to take out a loan due to limitations on how much money they can transfer between China and Australia at one time.
“Normally the Chinese buyer would definitely have a deposit and then they set up some sort of short term loan on the property they like or they buy off the plan with a longer settlement period,” he explained.
“They’ll then have that deposit paid off and will be waiting for the money to be transferred from China within six months to a year (to pay off the loan).”
Mr Li added the nation’s current financial climate and rising interest rates are not necessarily impacting Chinese buyers especially if they’re coming with the “bank of mum and dad”.
“It‘s only a short amount of time they actually borrow the money, purely for the purpose of actually taking time to get the money from overseas, so whether (rates are) 7 per cent or 9 per cent, if it takes a few months or a year, it wouldn’t make much difference,” he said.
Meanwhile Wayne Tseng, president of the Chinese Precinct Chamber of Commerce, added it‘s part of their culture for someone to purchase a home prior to starting a family.
“So any cost whether high property prices or high interest rates will not deter them from buying their own home,” he said.
Mr Ho added that Chinese buyers have more money in the bank post-Covid, meaning they can afford to splurge a little more.
“Chinese households added more than $US2.6 trillion ($AUD3.86 trillion) to their bank balances in 2022,” he said.
“Their bank deposits now exceed US$26.7 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,” he said.
It’s part of the Chinese culture to buy a home before starting a family. Picture: News Corp
How the influx in foreign buyers is impacting Australians
Mr Li said it’s likely foreign buyers are driving up the prices of homes, however this is only the case in certain suburbs where there is a high interest from this group.
The managing director used the example of Balmain in Sydney’s inner west, suggesting that because there is little interest from foreign buyers in that market, house prices won’t be affected.
However when looking at the same city’s eastern suburbs, Mr Li said competition was more ample due to the area largely attracting this group of buyers.
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“If we talk about the impact on the prices or competition, I think the eastern suburbs have taken a turn (due to) the Chinese having an effect on the pricing in the area as well as of course, Chatswood and Burwood,” he said.
“But outside these areas you probably wouldn’t feel it at all.”