Credit clamp deters Chinese investors

Wealthy Chinese investors have gone lukewarm on Australia because of new taxes and a crackdown on lending.

Chinese buyers still come to Australia, but they are more cautious today, says Juwai chief executive Carrie Law.

Chinese property investors are turning away from Australia and looking to the US and southeast Asia, finding new taxes and stricter bank lending are making purchases too hard, agents say.

The flow of credit from local banks to offshore buyers has dried up amid broader clamps on lending, while some states have been increasing foreign-buyer surcharges.

As well, fees have increased for applications to the Foreign Investment Review Board.

The Agency director of projects Steven Chen, who recently visited major real estate firms in Shanghai and Zhengzhou, said Chinese investors were looking elsewhere.

“They absolutely love investing in Australia for all the reasons that they’ve always invested — solid economy, safety, clean air,” Mr Chen said.

“But now, because of the taxes … what they said was it feels like it’s too hard to invest in Australia now.”

Instead, investors were turning to the US because of its educational opportunities, with the wealthier ones spending on commercial buildings or prestige homes in Britain.

Mr Chen said mid-tier investors were looking at Thailand, Vietnam, and within their own cities.

The exception was buyers looking to migrate to Australia, who still preferred to buy than rent.

This sentiment was borne out in figures from property platform Juwai, which found Chinese inquiries on the site for Australian property fell 6.3 per cent in the third quarter compared with the previous quarter.

In the same period, Chinese real estate demand in Thailand reached a record level, up 29.7 per cent from the previous quarter.

“Many of the countries seeing the biggest growth rates in Chinese buyer demand this year are the less expensive, convenient, and politically safe destinations in southeast Asia,” Juwai chief executive Carrie Law said.

“Chinese buyers still come to Australia and still buy here, but they are more cautious today.

“They are now less likely to buy as an offshore buyer and will wait until they have residency.”

Investorist, a platform that connects agents and developers, has also noted mixed sentiment towards Australia.

The number of Chinese agencies working on Australian properties on the Investorist platform has nearly halved in the year to October, while the US is up 25 per cent, and Thailand has seen a sixfold increase.

“Australia was the number one investment destination for the Chinese investors and Chinese purchasers,” Investorist chief executive Jon Ellis said.

“That’s not the case anymore. I would say Australia has slipped to at least number five, if not out of the top five, for destinations for people to put their money.”

Mr Ellis said investors looking for a safe haven preferred the US, Britain, or some parts of southeast Asia, while others looking to gamble had turned to Cambodia or even parts of Europe.

Meanwhile, Australia’s falling property prices have made offshore investors nervous.

Researcher Core­Logic last week downgraded its outlook for the country’s $7 trillion housing sector, saying the market was at its weakest point since the start of 2012 with values falling 3.5 per cent nationally during the past 12 months. Sydney’s housing prices dropped 7.4 per cent, Melbourne’s were down 4.7 per cent, while Brisbane’s increased 0.4 per cent.

In Adelaide, values rose 1.8 per cent for the year, and the more affordable Hobart lifted 9.7 per cent.

CoreLogic forecast a 10-15 per cent value fall from peak to trough in Sydney and Melbourne but, nationally, expects falls to be capped at 10 per cent.

Sydney housing prices rose 72 per cent in the five years to last year’s peak, while Melbourne boomed 57 per cent.