Chinese buying ‘no torrent’ as property buyers cool

Chinese buyers are returning to the local property scene but experts have warned there won’t be a torrent of capital to match the apartment boom.

The firm’s survey of mainland buyers showed that they were first looking to global cities like Singapore, but Melbourne has lifted in their preferences. Picture: Jason Edwards

Chinese buyers are returning to the local property scene as international borders open up again but experts have warned there will not be a torrent of capital to match the apartment boom.

The lifting of strict movement controls in the wake of the coronavirus pandemic has prompted a surge in international student arrivals and demand for rentals.

But an expected jump in home buying is further down the track as Australia is up against other regional destinations for Chinese buyers, according to equities house CLSA.

“It is reasonable to a assume a pick-up over the next six months or so, but the evidence from our recent survey of 1600 middle-class Chinese points to more of a steady stream rather than torrent, which may come as a surprise,” CLSA local property research head James Druce said.

He said he firm’s buyer intentions survey did not support another wave of Chinese investment in Australia similar to the 2014-17 boom.

“We’ve noticed that many investors expect that with the return of overseas students we will see a wave of Chinese buying. To date, our channel checks are not seeing a material pick-up in demand,” he said.

The FIRB data to December showed a pick-up in price of approvals but no change in volumes and the outlook data showed a drop in buyer intentions.

“We put this lacklustre response down to economic uncertainty in mainland China and affordability.

It is also clear that transaction costs and additional Australian taxes on foreign buyers have a material impact on buyer appetite – which is something the state governments may consider if they want to stimulate demand again,” Mr Druce said.

The firm’s survey of mainland buyers showed that they were first looking to global cities like Singapore, Tokyo and London. But Melbourne has lifted in their preferences, despite the city’s extended lockdowns.

CLSA found a significant decline in demand from mainland Chinese intending to buy overseas property in the next 12 months, with the tough state of its economy to blame.

Of those surveyed, 5 per cent intend to purchase an overseas property in the next 12 months, a drop of 4 per cent on the prior survey, in June 2021.

“The reason for the drop appears to be explained by affordability and low levels of job security/business confidence after a tough economic period and high interest rates. 2021 may also have been a particularly heady period,” CLSA said.

For those looking to buy, their Covid-19 experience is an important factor in driving demand to buy overseas property. About 76 per cent of respondents looking to buy said the Covid experience has increased the likelihood to buy versus 15 per cent stating they were unchanged in their view.

Although political tensions have dominated headlines, and perhaps hastened an exodus by mainland developers from Australia, they appeared to not to hit property buying.

The survey found that the US, Australia and Singapore were the favoured destinations for mainland Chinese, despite the first two countries stepping up their military ties.