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A generation of Australians are being priced out of the property market

“Locals priced out by $24b Chinese property splurge” screams the Sydney Morning Herald headline.

They report that close to one fifth of new properties in Sydney are being bought by wealthy Chinese investors and the flood of money is set to continue.

“Credit Suisse estimates that Chinese buyers account for 18 per cent of new property purchases in Sydney, and 14 per cent of the supply in Melbourne. This does not include second-hand homes.”

chinese-buyers“A generation of Australians are being priced out of the property market. Many face a life time of renting,’’ Credit Suisse analysts Hasan Tevfik and Damien Boey said.

There are currently 1.1 million millionaires in China who could easily afford properties in Australia’s two most expensive markets, Credit Suisse says in a research note.

Wealthy Chinese buyers have purchased $24 billion of Australia housing in the past seven years, and over the next seven years an additional $44 billion will be spent on residential property, Credit Suisse estimates.”

SMHoverseas-investors-in-Aussie-prop-300x0

Source: Sydney Morning Herald

“There was $17.2 billion worth of approved residential property investment coming in from overseas in the year June 30 2013, down from $19.7 billion in the previous period, according to the Foreign Investment Review Board.

Of the 2013 total, $5.6 billion was approved for residential properties in New South Wales.[sam id=41 codes=’true’]

That number may seem large, but across the whole property market the effect dissipates.

There is, on average, a 6 per cent turnover annually in Australia’s property, according to the Reserve Bank of Australia.

The total value of Australia’s property market is $5.02 trillion, according to the ABS, so yearly turnover in the housing sector would is roughly $360 billion.

Chinese buyers are currently spending $5.4 billion a year on Australian properties, Credit Suisse said, with the split relatively even between new settlers and others, which include investors, developers and temporary residents.”

My thoughts:

While Chinese investors may be pushing new and particularly off the plan apartment prices higher, they are not the reason for rises in established home prices as they cannot buy this type of property.

This segment of the market is being by low interest rates, generally good affordability and established home buyers upgrading and downsizing as well as investors buying real estate, often in the Self Managed Super Funds

[post_ender]



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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'A generation of Australians are being priced out of the property market' have 3 comments

  1. Avatar for Property Update

    March 22, 2014 @ 11:22 am Bob the builder

    In my mind (as wierd a place as that may be) the graph above shows almost half are being purchased by new settlers. Does this not mean once they are actually here they are then part of our population ?
    At that point are they part of the Chinese property splurge ? – or are they part of the rapidly growing Australian population’s requirement of shelter from sun and rain ?
    I honestly think a little more time spent by the media trying to grasp reality over grasping at straws – in order to find a sensational headline – would be less damaging to all those who believe their crap.
    The fact that a lot of new developments , especially high rise apartments , wouldn’t even get off the ground (no pun intended) without presales off the plans to overseas purchasers would most likely drive the prices higher still as there would be even less supply than demand which is the real reason prices are rising.
    Overall – overseas investment in residential property actually dropped by $2.5 billion !
    They actually state that above in the same article !
    Would you not think that would be having the opposite effect on prices ?
    I find it very hard to believe that this is even coming close to pricing out a “whole generation” of property purchasers.
    The media is obviously not a reliable source of information. Just recently my mother in law was at our place for dinner and was watching telly and all of a sudden said – “quick look at this , there is an American bloke on here saying property prices are going to crash in Australia. You better sell your properties quick before you lose all your money “. I’m not so sure about his credibility either ! And how did he get on telly ????
    My wife won’t even listen to me let alone get me a tv audience .

    Reply

    • Avatar for Property Update

      March 22, 2014 @ 11:35 am Michael Yardney

      Thanks Bob the Builder
      Like your previous comments, you make some good sense

      Reply

  2. Avatar for Property Update

    March 30, 2014 @ 5:27 pm David

    Michael
    Great article and you are right, the Chinese buyers are pushing up particular market segments, buth these are not just new and off the plan. A lot of chinese buyers are competing in areas where there are known good schools. These are suburban 4 + 2 + 2 type houses in good areas.

    Reply


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