Invest
How will falling Chinese foreign investment affect the Australian property market?
Invest
How will falling Chinese foreign investment affect the Australian property market?
Foreign investment from China in Australian real estate has been quietly on the decline for several years. It peaked in 2015-16 at $31.9 billion and dropped significantly to $6.1 billion in 2018-19, writes David Hancock.
How will falling Chinese foreign investment affect the Australian property market?
Foreign investment from China in Australian real estate has been quietly on the decline for several years. It peaked in 2015-16 at $31.9 billion and dropped significantly to $6.1 billion in 2018-19, writes David Hancock.
Various factors have contributed to the decline, including Chinese restrictions on money leaving the country, smaller Chinese student numbers, diplomatic tensions and a stronger Australian dollar. The Australian government tightened foreign investment regulations and increased fees and taxes, and banks tightened lending standards for foreign investors.
So, for the sections of the Australian property market that have become reliant on Chinese investment, will a continued decline in Chinese investment lead to falling property prices?
Foreign investment from other sources set to grow
The Australian property market is less propped up by Chinese investors than many assume. The declines year-on-year in Chinese investment have had a negligible impact on the property market.
What we’ve seen is that foreign investment from other countries has begun to plug the gap. Between 2017-18 and 2018-19, Hong Kong real estate investment into Australia more than tripled to $9.3 billion, and there were steep increases in investment by Singapore and Japan to $9.8 billion and $3.8 billion, respectively.
It’s clear there are plenty of other foreign investors who are just as interested in Australian property as the Chinese have been historically.
Investors and migrants to flock to Australia
Australia is increasingly becoming a highly desirable place in which to live and invest. With more favourable forecasts for the economy and greater political stability relative to other parts of the world, plus an excellent track record when it comes to suppressing COVID-19, Australia will become a haven for investors and migrants seeking stability and safety.
We can expect to see interest from migrants, foreign investors and returning expats from all over the globe including Hong Kong (where many people will be seeking to flee the unrest there), the US, the UK and South Africa. This will go a long way to replacing any lost Chinese migrants or investors.
Will Chinese foreign investment continue to fall?
As a result of the COVID-19 pandemic, Chinese student numbers will fall significantly in 2020 and 2021. Stable Australian property prices combined with a stronger Australian dollar mean that Australian property is yet to become more affordable for Chinese investors.
Restrictions on moving money out of the country are unlikely to ease amid diplomatic and economic pressures. This indicates that we are likely to see continued falls in Chinese foreign investment.
What will this mean for the Australian property market?
Continued foreign investment and migration from a variety of countries, combined with government intervention and low supply, will likely prevent any long-term property price falls.
Even if the property market experiences a structural change in regard to foreign investment away from China, this is unlikely to cause any significant impacts in the Australian property markets that are already underpinned by strong demand from local owner-occupiers.
Property markets with a high portion of investors, such as highly developed apartment markets, are far more likely to be impacted by a fall in Chinese investment.
By David Hancock, managing director, Binnari Property
Investment insights
Crude oil prices see an uptick amid the Ukraine conflict
Recent developments have led to a noticeable increase in crude oil prices, following Ukraine's targeting of several Russian oil refineries. Read more
Investment insights
Market turmoil brings opportunities for credit investors, Aeon Investments research reveals
New research conducted by Aeon Investments, a London-based investment company specializing in credit, has revealed a strong consensus among institutional investors on the potential value fixed income ...Read more
Investment insights
Investment in SMEs: Why they are the innovation leaders of tomorrow
The announcement that SMEs (small and medium-sized enterprises) will receive an additional 10% in government funding in 2024 has sparked interest among investors, recognising the central role SMEs ...Read more
Investment insights
Investor frenzy marks February's trading period as BA Financial Capital Income Fund reports
The BA Financial Capital Income Fund (BA FCIF) has experienced a vibrant February with hybrid activity witnessing a notable surge. Read more
Investment insights
Exploring real estate investment trusts in Australia: A beginner's guide
Real estate investment trusts (REITs) offer a unique opportunity for investors to tap into the lucrative property market without the need to directly buy or manage properties. Read more
Investment insights
Family offices set for growth in acquisitions and investments
Family offices are preparing for an uptick in acquisitions and investments in response to more appealing opportunities in the market, reports a new study from Ocorian, a leading global service ...Read more
Investment insights
Institutional investors predict a shift in the bonds and equities relationship
A new study from Managing Partners Group (MPG) reveals a significant shift in the perceptions of institutional investors and wealth managers regarding the correlation between bonds and equities. Read more
Investment insights
Capital One stands out with a significant number of AI patents among US banks
Capital One has risen to prominence in the US banking sector for its substantial focus on artificial intelligence (AI), holding 967 AI patents. Read more
Investment insights
Crude oil prices see an uptick amid the Ukraine conflict
Recent developments have led to a noticeable increase in crude oil prices, following Ukraine's targeting of several Russian oil refineries. Read more
Investment insights
Market turmoil brings opportunities for credit investors, Aeon Investments research reveals
New research conducted by Aeon Investments, a London-based investment company specializing in credit, has revealed a strong consensus among institutional investors on the potential value fixed income ...Read more
Investment insights
Investment in SMEs: Why they are the innovation leaders of tomorrow
The announcement that SMEs (small and medium-sized enterprises) will receive an additional 10% in government funding in 2024 has sparked interest among investors, recognising the central role SMEs ...Read more
Investment insights
Investor frenzy marks February's trading period as BA Financial Capital Income Fund reports
The BA Financial Capital Income Fund (BA FCIF) has experienced a vibrant February with hybrid activity witnessing a notable surge. Read more
Investment insights
Exploring real estate investment trusts in Australia: A beginner's guide
Real estate investment trusts (REITs) offer a unique opportunity for investors to tap into the lucrative property market without the need to directly buy or manage properties. Read more
Investment insights
Family offices set for growth in acquisitions and investments
Family offices are preparing for an uptick in acquisitions and investments in response to more appealing opportunities in the market, reports a new study from Ocorian, a leading global service ...Read more
Investment insights
Institutional investors predict a shift in the bonds and equities relationship
A new study from Managing Partners Group (MPG) reveals a significant shift in the perceptions of institutional investors and wealth managers regarding the correlation between bonds and equities. Read more
Investment insights
Capital One stands out with a significant number of AI patents among US banks
Capital One has risen to prominence in the US banking sector for its substantial focus on artificial intelligence (AI), holding 967 AI patents. Read more