Chinese investment flows ‘decrease markedly’

Tightening lending standards and foreign buyer taxes have seen Chinese investment in Australia “decrease markedly from their peak”, an international property portal has said.

While figures remain strong by historic standards, Chinese consumer buyer demand for property in Australia was down by around a third in the first quarter of this year (when compared to 2016), according to new research from Juwai.com.

After releasing its Chinese Global Property Investment Report, Sue Jong, chief of operations at Juwai.com explained: “Capital controls, bank lending standards and foreign buyer taxes have combined to wind back the clock to 2015.”

In May, the federal government announced plans to target foreign investors avoiding paying the capital gains tax as well as introducing a 50 per cent cap on pre-approved foreign ownership in new developments. Foreign owners who leave their properties unoccupied or unavailable for rent for six months or more each year would also be subject to a “ghost tax” of at least $5,000.

In June, the NSW government announced measures designed to improve housing affordability, doubling the stamp duty surcharge to 8 per cent for foreign buyers.

Australia still very popular

Despite the investor lending restrictions, Australia is the second most popular country for Chinese property investment, according to the Juwai.com report.

While the USA took out the top spot, Australia’s “world-leading” run of 26 years without a recession, as well as geographical proximity to China and an “appealing” investment market made the country an attractive prospect for real estate investors.

Between 2014 and 2016, buyers from China were approved to purchase $42.2 billion of property in Australia, the report said, adding that Chinese investment has been “one of the most significant enablers of Australia’s recent residential property boom.” However, the report also noted the unclear impact restrictions on foreign investment would have.

The Foreign Investment Review Board in May showed that foreign investment applications in Australia grew by 9 per cent in 2015-16, marking three consecutive years where China was the largest source of approved real estate investment. 

Rounding out the top five countries for Chinese investment were Hong Kong, Canada and the United Kingdom.

In South-East Asia, investor interest more than doubled for Cambodian real estate, while interest in the Philippines grew by 131.6 per cent.

International investment ‘extremely high’

The 2016 calendar year saw Chinese international investment hit $133.7 billion, surpassing the $130 billion mark for the first time.

Ms Jong, said that while Chinese investment in overseas markets as a whole would drop slightly in 2017, estimated to be around $105 billion, it would still make it “one of the top two or three years in history”.

“While [Chinese investment] levels are lower than in 2016, they will still be extremely high by any standard,” she said.

[Related: ‘Trump effect’ causing Chinese buyers to eye Australia]

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Lucy Dean

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