Basis Point general manager CT Johnson has flagged the Chinese government’s move to restrict foreign outflows of Chinese capital as an underlying risk for Chinese investment in the Australian property market.
“There’s been increasing problems for Chinese people who wanted to buy property. The main problem there has been that over the last 18 months, the Chinese government has started to squeeze on their ability to get money out of the country,” Mr Johnson said at the company’s annual Australia-China Investment round-up.
“We believe that the first half of 2017 will be slow in the property sector because of the currency issue.”
That combined with APRA’s decision to prevent Australian banks’ capacity to loan to foreign investors should see reduced property demand coming out of China.
“That is a double whammy to a lot of Chinese people wanting to buy off-the-plan properties,” Mr Johnson said of APRA’s decision.
Despite these pressures, Mr Johnson remained confident that these factors would not prevent settlement of existing investment property deals.
“Is there settlement risk? Is there going to be a crash in the market? I have consistently said ‘no’ and we don’t see settlement risk being significant going forward,” he said.
“We’re talking about mum and pop investors who are trying to get part of their wealth out of China, who are emotionally committed, so they will find some way to settle mostly.”
Mr Johnson said the new regulatory environment will likely only hurt new Chinese property investment.
“[New investors] don’t even know how to get the deposit out of China, much less knowing that in three years they’re going to be asked for 90 per cent of the money and they just can’t do it. It’s too hard and I think that’s the dynamic we’ll see going forward,” he said.
However, that doesn’t mean Chinese interest in the Australian property market will dissipate in the long term.
“The second half [of 2017] will probably get back to a more normal sales environment in property,” Mr Johnson said.
“Underlying demand will remain extremely high as Australia with its lifestyle and wonderful environment, remains very, very attractive to the Chinese.”