The Chinese property crisis has spread to Australia.
After years of being the main buyers of Australian apartments and dwellings, overseas Chinese are now sellers, particularly in Sydney. Many are selling because of their difficulties at home and are being forced to sell at a loss.
It’s ironic that as previous foreign buyers become sellers, Federal Opposition Leader Peter Dutton plans to stop foreign investors from buying existing dwellings for two years.
We are not only proposing to shut the stable door after the horse has bolted, but the horse is now racing in the other direction.
The events taking place in Sydney have few precedents.
The Sydney apartment market is different to all other capital cities because it is dominated by one builder/developer – Harry Triguboff and his Meriton group.
The first clue to the looming fundamental change came in The Weekend Australian, when Lisa Allen revealed that Triguboff planned to substantially slow down the development of new apartments.
That decision is not surprising given he has three major projects under construction involving around 1,400 apartments. And apartments from previous developments are also on the market at a tough time.
Many Australians wanting to buy apartments simply can’t raise the money, given the restrictions on bank lending and the high interest rates. And the new apartments are competing with older apartments being sold by the Chinese.
Triguboff has always held some apartments back for rent, but is now only putting one third of his new apartments on the open market, with the rest being retained by Meriton and rented. Meriton is set to have an enormous stock of rental properties.
To have Sydney’s only major apartment developer retaining and renting two thirds of his developments will soon put Sydney on the same path as Melbourne, which is set to become a haven of renters rather than property owners.
This will involve a fundamental change in the society with considerable political ramifications because renters tend to vote ALP or Greens.
My understanding is that the Coalition in its election campaign next year will have a comprehensive set of policies which will aim to enable ordinary Australians to buy apartments and houses in the capital cities.
Almost certainly it will involve enabling first home buyers to access current and future superannuation to fund purchases.
But it won’t be easy because, with the help of the new industrial relations legislation, the CFMEU is entering the cottage market aiming to gain in much higher wages and to lower productivity.
Triguboff would of course welcome any rise in first homebuyer numbers, but what he really wants is lower interest rates, which will make it easier for people to buy his apartments and lessen the cost of holding apartments for rent.
Not even lower interest rates will greatly alter the development delay pattern in Sydney because NSW Premier Chris Minns has an army of bureaucrats and others whose task it is to devise new features for buildings that increase the cost.
They also add to local councils and associated bodies in delaying developments also increasing the costs.
Triguboff’s current three major Sydney developments were subject to long delays, but they gained approval together as the market turned down.
Meanwhile, one of the projects to be mothballed will be Randwick’s Little Bay development, originally set at 1,900 apartments.
On the Gold Coast, Triguboff had planned two major towers, and one is under construction. The other will be mothballed. Queensland development is now being affected by the CFMEU which not only achieved huge pay rises but instigated work rules that slash productivity, triggering a substantial rise in the cost of major project building in Brisbane.
I have pointed out previously, this is one reason why Australia’s 2032 Olympics’ Brisbane organisers have been forced to slash original facility plans to showcase the city.
In Victoria, the ALP’s main funder, the CFMEU demanded that there be a continuation of high cost labour employment in government infrastructure once the current projects are completed.
Somebody thought up the idea of a suburban underground “train to nowhere” where land above would be forcibly acquired and rezoned for high rise rental development, so turning at least one and probably two Liberal electorates into Labor strongholds.
The credit rating agencies turned a blind eye to the enormous borrowing involved.
By deliberately making home purchasing too costly for those in their 20s and 30s, we are in the process of converting our major cities to European-style rental communities with enormous long-term ramifications for politics and community well-being.
Many of those who rent will have no secure retirement.
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