前言
Chinese investors are often blamed for rising house prices in Australia, but many factors may mean that demand will fall in the coming years.
A recently released report found that Chinese investment in residential real estate is slowing. As the rental yield gap between the two countries has narrowed and house prices have risen, the appeal of Australian residential real estate has begun to diminish. Lifting restrictions on ownership of Chinese urban residential property and currency restrictions on personal investment may also play a role.
China has $ 1.34 million of high net worth individuals and 568 billionaires. The sum of their net assets is equal to Australia’s GDP.
Many Chinese investors can obtain legitimate and hidden income and wealth, and try to invest in overseas real estate. At this time, China is facing its own housing affordability crisis.
Why Australia looks attractive
In 2015, Chinese investors invested approximately $ 6.8 billion in Australian commercial and residential real estate. Current Foreign Investment Review Board (FIRB) policy shifts inflows of real estate investment funds to new homes, thereby creating more jobs in the construction industry and supporting economic growth.
Although temporary Australian residents may be required to sell older residential properties after leaving Australia, many foreign citizens can still retain, rent, sell or live in newly built homes. This is the main attraction of Chinese investment in new residential buildings.
Other pulling factors include: compared with China, Australia’s financial institutions are stable, the land ownership system is regulated, the real estate market is active, capital returns are high in major cities, and deposit requirements are low.
Australia’s Foreign Investment Review Board (FIRB) may be aware of these factors when considering new foreign investment in the real estate market, but it is difficult to offset China’s property law restrictions and investor demand.
Chinese factors at work
The state of China’s economy and regulatory environment has also prompted Chinese investors to focus on overseas markets. The devaluation of the RMB is an important force. As the yuan depreciates, Chinese investors will reconsider their ability and where to buy.
Australia’s rental yields in major cities are 2-3%, which is twice that of China. Chinese legislative changes to residential real estate investment also make Australia look attractive.
China has a dual property ownership system that separates urban and rural land ownership systems. Rural cooperatives own rural land ownership. Cooperative members can only be sold to other members of the same rural cooperative.
This limits competition for rural land and keeps rural land prices low. But this also means that rural land is an unattractive investment option for the Chinese.
On the other hand, urban land is still state-owned and offers homeowners a 70-year lease system. The system limits ownership of urban dwellings to registered urban residents or persons who have lived and paid taxes in the same city for five consecutive years. This situation has prevented many Chinese from buying urban residential properties.
Between 2011 and 2015, properly registered persons were limited to buying up to two residential properties in their urban area-one for residence and the other for investment. This restriction still applies in Beijing.
As more and more people are excluded from the housing market, restrictions have been introduced to offset major housing affordability grievances. The 30% deposit requirement for the purchase of residential real estate aggravates this problem. The combined effect of these factors has forced many Chinese investors to buy real estate on the Chinese black market with uncertain ownership or to look for investment opportunities outside China.
China’s State Administration of Foreign Exchange introduced new regulations in November 2016 to tighten capital flows from China. The agency’s mission is to approve more than $ 5 million in overseas payments. However, most home acquisitions in Australia fall below this limit.
Beginning in 2017, a new rule limits the annual foreign currency holdings of individual investors to $ 50,000.
As we all know, large Chinese development companies operating in Australia sell “planned” personal homes directly to Chinese real estate investors. In this case, developers will have vested interest in finding ways to circumvent new restrictions on foreign exchange holdings in order to settle contracts. However, developers need to spend some time adjusting their methods.
As house prices rise, rental yields usually decline. This is because investors borrowed a lot of money compared to borrowing income.
Although Melbourne and Sydney’s rent prices have risen sharply, they are not in line with house prices. Rental yields in major cities have fallen.
With rental yields ranging from 1-1.5% in China, some investors are reconsidering whether it is worth renting their home. Instead, they rely on capital gains to create profits while leaving their property vacant to prevent property damage. This practice has severely affected the supply of leased properties in China.
As Australia continues to struggle with rising house prices and falling rental yields, residential real estate investment has become less attractive as a long-term investment for Chinese investors. A reliance on capital gains could lead to an increase in the number of vacant properties in Australia, offsetting FIRB’s intentions.
Restrictions imposed by Chinese regulators may slow the flow of funds out of China in the short term. However, Chinese investors may find ways to avoid these restrictions. Lifting restrictions on Chinese residential property ownership may refocus investment choices within China.