Apartment sales: the Chinese are back in the game

Potential buyers look at Australian apartments at a showcase in Shanghai.

Australia might be out of favour with China’s ambassador to Australia, Cheng Jingye, and the Chinese government, but we are not out of favour with important segments of the Chinese population.

As the ambassador threatens that China might stop buying Australian meat and wine and sending students to Australia, in the property market the reverse is happening — the Chinese are back buying Australian apartments.

It’s a dramatic and surprising turnaround. While the buying is being executed by locals, they have close links to those on the Chinese mainland.

Early in the year, when the coronavirus was ravaging China, there was a sharp reduction in the Chinese buying of apartments in Melbourne, Sydney and Brisbane.

Around six weeks ago, as the crisis eased in China, Australia emerged as one of the world’s best performing COVID-19 nations, increasing our attraction to Chinese property buyers.

Slowly, at first, the Chinese returned as buyers of Australian apartments.

Melbourne attracted many buyers and Meriton CEO Harry Triguboff says that there has been strong Chinese buying of apartments in both Sydney and Brisbane over the last month.

Sadly, as I describe below, Australian first home and other local buyers have evaporated.

But the return of Chinese property buyers is an encouraging sign for the long-term university outlook because property buying is normally linked to student flows.

The numbers of Chinese students has declined sharply this year because of the difficulty in travelling to Australia and then maintaining a standard living here given the closures of bars and restaurants where the students earn income.

Given this year’s fall and the statements by the ambassador, universities have grave fears that this export industry is set to collapse in 2021. But our rival countries such as the UK and the US have really serious COVID-19 crises.

And thankfully in Australia, the Victorian government has stepped in to do what the Commonwealth should have done and helped stranded overseas students who were having trouble funding living expenses, given the collapse of their casual workplaces.

With Canberra sadly turning a blind eye to this key export industry, other states will need to follow Victoria.

But there is also an Australian downside to what is happening in housing and universities.

At the end of 2019 and the start of 2020, we saw a resurgence among first homebuyers as they returned to the purchasing table after a long absence. They have now withdrawn, fearing for their jobs and income levels.

And this is being reflected in the rental market, which is in clear decline as tenants negotiate lower rent and new renters are not paying the old levels because they simply can’t afford such payments.

Many have left the market and returned to their parents’ homes. Others put an extra bed into an already crowded unit.

And, of course, the overall rental market is being pushed down by the lack of tourists to rent Airbnb properties.

The pandemic means interest among Australian first home and other local buyers has evaporated. Picture: AFP

It will be some time before many Australians feel confident enough to return to the housing market. Indeed, Westpac has cut back its loan levels to those working in professional bodies like accounting firms. This will hit dwellings in the higher price brackets. But we need to learn from the underlying forces that are being exposed.

State governments, planning bodies and local councils need to start considering the cost of the burden they are placing on ordinary Australians by adopting practices and rules that boost costs.

In Victoria the approval process is a nightmare and greatly increases the costs. In New South Wales there has been some improvement in this area but planning bodies keep stipulating requirements that boost the costs.

For example, whereas in Victoria carparks in apartment blocks can be above ground (so substantially reducing building costs) in New South Wales they demand that car parks be put underground. This substantially boosts the costs.

And the requirement also adds to the hazards of building apartments in New South Wales and contributed to a number of the failed apartments, making it cheaper to pull them down than repair them.

And New South Wales regulators delight in stipulating measures to achieve cost increases. The latest is to change the stipulations for glass apartments.

Every time a government or planning body makes a new stipulation without considering the costs it makes it harder for local Australians to get into the housing market.

At some point the lower purchasing power of many Australians in the light of COVID-19 will need to be considered by the well-fed regulators – who currently rarely consider such matters.

Meanwhile our universities also need to take a lesson from the current decline. The COVID-19 crisis has shown a real weakness in our universities. It’s true they developed a fantastic export business, but this took their attention away from the needs of the local market.

In Australia more and more local tertiary graduates are now going into medium-size businesses and sometimes very small ones.

The universities make them “job ready” for large organisations that have special training programs, but they are totally unprepared for the environment they face in a medium-size enterprise. Universities will need to develop new programs so that they also cater for the local market.

Like the rest if the nation, our universities have received a warning that it is very dangerous to be too dependent on one source of students. They need to heed it.