Chinese buyers have taken centre stage on Australia’s property scene following an exponential surge in real estate investment from offshore markets.
China is by far the biggest foreign buyer of residential and commercial property, proposing $24.3 billion of spend in 2014-15 – more than triple the United States and six times the outlay from Singapore, the Foreign Investment Review Board annual reports shows.
This is a giant leap, considering the value of China’s proposed investment was behind the United States and Singapore in 2011-12 – at just $4.2 billion. Some experts tip India will be the next major player in Australian real estate.
Property experts say some Australians priced out of the market after years of prices growth are using overseas-based Chinese buyers as scapegoats responsible for housing unaffordability.
The media overemphasis on “Chinese” buyers over other ethnic groups such as Indian, French or Canadian has fuelled public concern over whether these buyers are inching the Australian dream further out of reach.
The generalisation of the term Chinese buyers, to include anyone of Asian appearance or with an Asian surname, has placed local and international buyers in the same basket, and exaggerated the extent of Chinese interest.
Property experts reveal some of the biggest misconceptions:
1. Overseas Chinese investors are pricing Australian first home buyers out of the market
Offshore Chinese investors and first home buyers generally don’t compete for the same properties.
In Melbourne, Chinese investors are mostly interested in new CBD apartments and suburbs with a strong Chinese community, such as Box Hill and Glen Waverley.
Most buyers of existing dwellings are migrants – or Australian Chinese. Offshore buyers have been snapping up new multimillion-dollar houses until FIRB rules were clarified at the end of last year.
It’s true first home buyers targeting some pockets will face competition. But young buyers are more likely to prefer established apartments, townhouses and semi-detached houses in inner-city pockets such as Prahran, Brunswick, St Kilda and Richmond.
Offshore buyers can buy new apartments or townhouses with FIRB approval, but those with specific temporary visas can buy one established property to live in, provided they sell it when it’s no longer their residence.
Investorist chief executive Jon Ellis says many Chinese investors are purchasing off-the-plan apartments in the CBD, while first-timers are buying established apartments in suburbs like Caulfield.
Based on their sales data, more than 70 per cent of all new apartment buyers are investors.
Mr Ellis says Chinese buyers are helping first home buyers because they’re increasing supply, and also stimulating construction activity which is keeping the economy afloat.
“Australians love a scapegoat. The First Home Buyer’s Grant was blamed for driving up property prices … baby boomers were blamed for pricing first home buyers out of the market; there’s always someone to blame,” he says.
“And at the moment, the Chinese are getting a bit of a ribbing.”
2. Chinese buyers with endless financial means are bringing suitcases full of money
Esther Yong, director at Chinese portal ACProperty, says the majority of average buyers are looking at properties priced between $500,000 to $800,000.
“A lot of people think they just walk up with suitcases of money, but that doesn’t usually happen,” she says.
“Generally, there’s more news about people buying $5 million, $10 million and $20 million houses than just someone buying a $500,000 house … so most people think Chinese buyers are really rich.”
ACProperty director Esther Yong says Chinese buyers aren’t walking in with suitcases of money. Photo: Josh Robenstone
Ms Yong says Chinese families usually plan and save for a property as a top priority, sometimes even over marriage.
“[Property] is the first thing that families talk about when they sit down together,” she says.
“It is something that’s embedded in the [Chinese] culture; first things first, own a property.”
Chinese buyers are usually very cautious with their money and don’t like to overstretch financially.
Mr Ellis says the majority of Chinese buyers usually make their investment decisions before visiting the property in Australia.
“They certainly don’t bring any suitcases of cash because they’d be stopped at the Australia customs,” he says.
There has also been a Chinese government crackdown on illegal offshore money transfers.
3. Chinese buyers tend to overpay on properties
Some vendors believe they can get top dollar for their property if they sell their home to a cashed-up Chinese buyer, but that’s not always the case.
Chinese buyers like to negotiate, and some agents would even say they’re savvy buyers.
Sure, they’ll pay a premium if they think it’s worth it, or it has unique features. But so would local buyers.
Ms Yong says many Chinese buyers have family and friends living in Australia, and would help them with their research.
Biggin and Scott Glen Waverley director Ming Xu says offshore buyers are rational, and are sensitive to exchange rates, immigration policy and how safe a country feels.
4. Chinese buyers aren’t concerned about dwelling size
Investorist’s China 2016 International Property Outlook, which surveyed 150 real estate agencies selling off-the plan properties across China, found Chinese buyers are not looking for micro apartments.
Mr Ellis says not a single agency said their clients would favour an apartment under 50 square metres.
However, an offshore investor venturing into the Australian market may start off with a smaller property because it’s more affordable.
“First-time investors might start with a property less than $500,000 … but once they’ve bought one, they then realise they want to invest in higher-value properties and they start [investing] in more blue-chip stock between $600,000 and $1 million,” he says.
“The agencies now are directing their clients to buy bigger, more liveable properties.”
5. Chinese investors leave apartments and houses empty because they’re not chasing rental return.
Apartment buyers usually rent the property out, Ms Yong says, but Chinese buyers intending to migrate to Australia may keep a big house empty until they move so that the property’s still new.
She says many of their users would jump on the rental section of their website to research potential rental return before they buy in an area.
Mr Ellis says yields is an important consideration for Chinese buyers, and they’re especially looking for rental guarantees.
The Investorist survey found investment is the number one motivating factor for Chinese buyers, followed by education, migration and lifestyle.
“We drilled into investment further, and asked them what sort of yields they wanted, and they’re happy with 5 per cent,” Mr Ellis says.
“They’re not wanting astronomical yields and they’re doing it for investment.”
6. Most Chinese buyers shun properties with a street number 4, and the right number play a big part in their decision making
It’s true that the number eight is linked to good fortune because its pronunciation ‘ba’ in Mandarin, and ‘baat’ in Cantonese, sounds similar to the word for prosperity.
And sure, some buyers might even pay a bit more at auction just to land on $888,888.
Likewise, the number 4 is seen as unlucky because it sounds like the word die.
But Mr Xu says the sale price will more likely depend on the property, particularly for younger Chinese buyers.
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