Chinese Demand for Homes in Australia Not As Hot as Before

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Chinese Demand for Homes in Australia Not As Hot as Before

September 13, 2016

 Chinese buyers have been absolutely critical to the emergence of Sydney and Melbourne as the hottest property markets in the world. If you’re planning to sell your apartment in Melbourne Australia fast, then your best chances are to look for Chinese investors.

However, there’s a lot of ambivalence about Chinese buyers as far as the public opinion in Australia is concerned.

There’s a school of thought that argues that Chinese buyers are making properties for sale in Melbourne Australia expensive for everyone else. Many have complained about Chinese buyers flouting foreign ownership laws in the country.

Now, though, there’s another risk, perhaps a more serious one. There’s a palpable fear that the Chinese buyers might be losing interest in Australia. Australian real estate experts believe that if the Chinese stop buying properties in Australia like before, the construction boom in the country would be severely affected.

Shane Oliver, a top Australian economist, suggests that property prices in the country could fall by 15 to 20 percent over the next couple of years because of two reasons – overheating of the real estate sector and the recent lack of interest shown by Chinese buyers in the country.

Mr. Oliver suggests that people are better off waiting for the dust to settle in the housing market before looking for new opportunities to buy at lower prices.

Analysts from Credit Suisse Securities Asia have a similar opinion. They recently that a correction was due in the Australian housing market: “Issues of affordability and household debt are overextending Australia’s real estate bubble, which is being held aloft by foreign capital. Tightening bank credit standards are the likely catalyst for a correction.

“Our base case has the crisis starting with cheap apartments and later spreading to other flats in close proximity. This is likely to lead to defaults among small developers and a sharp contraction in apartment construction. However, it is unlikely to result in sharp price declines in other regions.”

One of Australia’s top real estate developers, Harry Triguboff of the Meriton Group warned of the consequences of driving Chinese money out of the market.

He said in an interview with the “There are a lot of Chinese now that are not settling [on off the plan purchases] … the numbers are very significant. Now the people are running around trying to find alternate finance.”

The new capital gains tax requirements and the more stringent loan-to-valuation ratios from Australian banks have acted as a dampener on the whole market. Some of the xenophobic remarks by rising political stars such as Pauline Hanson haven’t helped matters either.

Analysts from the CLSA have warned of a recession in the housing market in the country if corrective steps aren’t taken soon to address Australia’s new “China crisis”. According to the CLSA, a worst case scenario would “result in dwelling prices falling sharply in all areas, eventually leading to a recession”.

Other experts suggest that there’s plenty of evidence to suggest the presence of a housing bubble in Australia, especially in Sydney and Melbourne because of too many tax incentives to local investors, the low interest rate regime, and overselling of properties to foreign investors.

It’s just possible that Chinese buyers have sensed this before a vast majority of Australians, which is why many have decided pull back some of their investments from the country.