CT Johnson, managing director of China Research company Cross Border Management, told Mortgage Business that – despite recent crackdowns on foreign investment – overseas buyers from China are still keen to buy in Australia, and are increasingly looking to the land down under as an alternative to the United States.
Mr Johnson said: “Everyone was focused on Donald Trump and the Trump effect, and the lingering concern among the Chinese is that America just won’t be as friendly a place for them to invest in, or go to school in, or live in, as before.
“Australia is different in comparison; it’s seen as friendlier. So, there's a great interest in Australia based on worries about America.”
10-20 years left for Chinese appetite to buy in Australia
Further, Mr Johnson noted that “underlying demand” remains very strong, and that he did not think it would be satisfied anytime soon.
“I would expect that there [are] 10 to 20 years left in [the running for] Chinese wanting to buy into the Australian market”, he said.
“As with anything, there are going to [be] bumps and slowdowns. And, definitely, over the past 18 months, it has been difficult for Chinese buyers. First, because the domestic Australian banks stopped giving them mortgages, and then the Chinese government put restrictions on the amount of foreign exchange they could do. So, basically, we had this situation where they couldn’t get a loan and they couldn’t pay cash, and that made it very hard to buy the property. But what we have seen is a range of things solving that problem.
Mr Johnson said that the dawn of new lenders was a major part of this, as well as more solutions for moving money out of China than there were before (and the existing solutions are now more widely known and used).
“And finally,” he said, “going back to the Trump piece, there is actually a pretty large amount of money that is already out of China, and that money is effectively being recycled either from other jurisdictions, such as America, or even within Australia itself.”
According the Cross Border Management MD, there has been a change in demographic for the people buying in Australia too – as 20 years ago his clients were mainly the “super rich” seeing more than $15 million a year in turnover, whereas now he is seeing more people come to him with $5 million a year turnover.
Lack of data on Chinese investor impact is “astonishing” and “disturbing”
Mr Johnson added that one of his biggest frustrations was the lack of data over how foreign investors, such as Chinese investors, was impacting the Australian market.
He said: “Looking at the census data from 2011, there was maybe a 10th of 1 per cent in terms of growth rate regarding where there were lots of Chinese buyers and where house prices grew fastest.
“The things that’s disturbing to me is that we know so little about the actual effect they are having. When I looked at other analysis that described that, for example, Credit Suisse made a big noise recently that something like Chinese offshore buyers account for 80 per cent of new off the plan properties in NSW, but they presented no evidence and no analysis to talk about the actual prices… We know last year there was report from the federal government that said that foreign buyers had not had a big impact on it. The unfortunate part of that was that they didn’t present their data, just their conclusions, so we couldn’t understand how they came to that evaluation. So, there is a huge question to me about whether they actually do impact the prices or not.”
As such, Cross Border Management has partnered with BIS Oxford Economics Pty Ltd to evaluate what the real impact of Chinese buyers has been on Australian house prices.
“We need this data analysis, because we just don’t know [what the effect is]. Maybe they are behind this problem, this lack of affordability, or maybe they have nothing to do with it. But this is a centrally important question to every single person in Australia, and it is astonishing to me that we know so little about it.
“I’m not willing to say whether there is a problem or not because we just don’t know and nobody knows, apparently. It’s frustrating. So, we’re doing some work on this to find out.”
The findings of the Cross Border Management/BIS Oxford Economics Pty Ltd research is expected by winter 2017.
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Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.