Are Asian buyers pushing up property prices? The RBA’s view – Pete Wargent

A subject which has been receiving reams of coverage of late.

As I noted in my book Get a Financial Grip a couple of years ago, the dollar as likely to eventually depreciate (it now has) and Asian buyers will no doubt come looking at Australian real estate (they have).

But such investors are hardly likely to go researching obscure regional centres or semi-rural towns.

Just as in London, prices will be generally be pushed up in inner city areas, close to universities and similar facilities and infrastructure.

It seems Glenn Stevens thinks the same:

“RESERVE Bank governor Glenn Stevens says that wealthy Asian investors are bidding up Australian home prices, with inner-city areas feeling the greatest pressure – and specialist estate agents confirm it.

They have revealed the Melbourne suburbs on rich Chinese buyers’ hit lists.

Fitzroy, North Melbourne and West Melbourne are now targets, joining Brighton, CBD and Southbank, among other hot spots.

Mr Stevens told a parliamentary hearing in Sydney on Friday that the wave of Asian investment in Australian real estate was akin to investment by Russian oligarchs in London properties.

A frequent flyer, Mr Stevens said he often noticed advertisements in Asian countries tempting investors to buy Australian real estate.

“I travel through Singapore a number of times a year on the way to interminable meetings in Basle,” he said.

“It is quite noticeable when you pick up a Singaporean newspaper on the plane to see advertising for Australian property, as well as property in other countries. So there is no doubt that wealthy foreign investors have an interest here.”

He said he believed most of the interest was confined to inner city areas, near universities.

“If you are sending your children to study in Australia, you are probably an affluent person and quite possibly, in some cases, you have purchased an apartment in which they would live or which you might come and stay in when you come to visit them. There are people who are wealthy enough to do that.”

Mr Stevens said he believed the issue may have been overstated, but that “in particular parts of our cities, the role of foreign investors is quite prominent indeed”.

He added that all foreign investments had an impact on local prices.

“It has its effect on asset values and the exchange rate, just like all the other forms of foreign investment,” Mr Stevens said.[sam id=41 codes=’true’]

Unsurprisingly, the article highlights that much of the interest in Australian real estate has come from China:

At the same time Mr Stevens’ statement emerged, a pair of Mandarin language websites advertising Australian property for sale have told the Herald Sun which suburbs are getting the most attention.

Juwai.com, a China based real estate website that commands a monthly audience of about 1.5 million cashed-up prospective buyers – 82 per cent of which live in mainland China, has Australia as its second most popular search location, behind the US.

CEO Simon Henry told the Herald Sun the bayside suburb of Brighton topped its list, followed by the CBD, Kew, Southbank, Glen Waverley, Richmond, Fitzroy and Box Hill.

He said for buyers in mainland China the four key reasons for looking to buy in Australia were: investment, education, ego or lifestyle and immigration.

Upper class Chinese typically spend 70 per cent of their disposable income on educating their children, according to a recent survey by the Chinese Central Government cited by Mr Henry.

That translates to an average spend of $1-$1.5 million for a property for those children to live in overseas.

“Traditionally in China the family unit has always been very, very tight – the kids will typically take on the responsibility of taking care of their parents,” Mr Henry said.

“With the advent of the one child policy they only have one to take care of them, so they are making sure they are well educated.”

In the past year Juwai.com has seen Chinese buyer interest in Melbourne rise 888 per cent, and a “dramatic increase in properties being added to their advertising”.

“I think it’s a good thing … it helps stimulate the economy and new projects and it’s a trend that will continue in the foreseeable future,” Mr Henry said.

A separate Chinese language real estate website, ACProperty.com, which is based in Australia and has a high proporting of overseas buyers, revealed its top 20 most inquired about suburbs in the first two months of this year.

The CBD topped the list and was followed by Box Hill, Doncaster and Carlton. Further down the list were Point Cook, 10, West Melbourne, 13, Forest Hill, 16, and Murrumbeena, 18.

“As they could not buy established houses, land and house packages in west side became very attractive,” said Esther Yong, a ACProperty sales and marketing manager.

“To own a house with large garden and back yard is always preferred by a lot of Chinese investors.

“It is also quite interesting that the popularity of Point Cook properties are not solely driven by relatively cheap prices as we saw quite a lot of inquiries went to some luxury and expensive houses in Sanctuary Lakes.”

Ms Yong said she believed already substantial increases in demand seen on the site would be fuelled by new restrictions to investment in mainland China announced last year and six Australian universities being ranked highly in the recently released QS World University Ranking.”

[post_ender]



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Pete Wargent

About

Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog


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