Experts debate impact of Chinese buyers on Australian property market

Foreign investors are back in the property market and it could be bad news for those trying to get on the property ladder. But experts disagree about the impact.

A surge in interest from Chinese investors has sparked renewed fears foreign buyers will drive up the price of Australian housing and leave local first home buyers out in the cold.

The Australian property sector has been battered during the coronavirus pandemic as unemployment soars, border closures limit access for buyers and social distancing saw inspections and auctions temporarily cancelled.

Despite this, data from Chinese property portal Juwai IQI showed interest in the Australian market remained strong.

In the first quarter of the year, Chinese enquiries dropped 14 per cent but this was only slight compared to the whopping 40 per cent drop from Australian buyers.

This sent tongues wagging and stoked fears Aussies would be outpriced amid problematic commentary already littered with anti-Chinese sentiment.

"China is back in business much earlier than the rest of the world," the portal’s George Chmiel told A Current Affair.

He said Australia is a popular site for investment because the weakened dollar provides a buffer for foreign conversion while its universities, market strength and success in containing the pandemic means the economy should get a head start on the US and UK.

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Standen Estate Agents sales executive Emma Vadas specialises in Sydney CBD high-end dwellings — a portion of the market frequented by Chinese buyers.

She told news.com.au this cohort dominated the market during the property boom between 2013 and 2017 before abandoning our shores.

Last year Ms Vadas sold only one or two properties to a Chinese buyer but interest was beginning to come back in December and now nearly all interest in her properties is from this category of investor.

“We've seen about 90 per cent of enquiries at the moment coming from Chinese buyers,” she said.

"It's interesting to note these are not new people, these are not random people I have never dealt with, these are people who bought and sold from me two-four years ago and have just come back into the market.

"There certainly is a perception of value at the moment.”

But these buyers aren’t reflective of the Chinese middle class flooding the local sector, Ms Vadas says, they are dual citizens or permanent residents who conduct business in Australia and contribute to the country.

She said buyers from the world’s second largest economy have been a “heavy driver of price growth” in Australia and have been active participants throughout her career.

“The fact they’re coming back into the market is a healthy sign,” she said.

Auctioneers were forced to operate online during the coronavirus lockdown. Picture: Glenn Ferguson

The surging interest in the Australian market is more akin to window shopping, according to Starr Partners chief executive Douglas Driscoll who said buying was limited to dual citizens due to fiercely strict laws forbidding money leaving China.

To help prop up its own property and share market, its supreme court introduced stiff penalties at the beginning of last year for illegal money exchanges which included five years imprisonment.

New figures from the Foreign Investment Review Board reveal the declining interest over the last few years.

Between 2015-2016, Chinese investment in Australian agriculture, resources and real estate totalled $47 billion and fell sharply to $15 billion in 2018-2019.

"I haven't actually seen any correlation between a renewed interest and acquisition or volume numbers,” Mr Driscoll told news.com.au.

But he warned a return to a period of large scale foreign investment could be destructive for the market.

"If you've got swathes of overseas buyers buying Australian property, I think it's tantamount to selling off the family silver,” Mr Driscoll said.

"If we continued on the path we were on two-three years ago, we would have had a disproportionate amount of Australian property owned by overseas buyers.

"And what that does is it affects first home buyers who are struggling to get a foot on their very own property ladder.

"We've got to keep a lid on it and we've got to be able to control it.”

MARKET FORECASTS ‘WITHOUT FOUNDATION’

The Commonwealth Bank this week forecast a staggering market collapse of 30 per cent following an expectation from Westpac house prices would fall by 20 per cent.

Mr Driscoll said rising unemployment and continued economic uncertainty will contribute to lower house prices but questions the grim predictions, saying his team at the “coalface” are yet to see any falls in Sydney prices.

“I certainly don't agree with some of the numbers that are being bandied around, I think they're sensationalists, quite frankly, and without foundation,” he told news.com.au.