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New Chinese Credit Laws Push Investors To Australia

As our real estate markets surge there are reports of first-time buyers being pushed out of the market by ugly, greedy property investors taking advantage of negative gearing.

Of course there have also been cries about property prices being driven up by overseas investors.

This is partially true, but remember foreign investors can only purchase new properties or sites with development potential.  This means while many off the plan projects are being bought up by foreigners, these buyers do not affect really the established home market.

But now new credit laws in China means it is likely that Chinese investment into Australian property will remain strong.

Your Investment Property Magazine recently reported on this issue:

Foreign investment in Australian property continues to grow as China faces a record drop in new credit levels.

China’s cabinet recently imposed new controls on the nation’s shadow-banking industry, targeting off-the-books loans.

Estimates and data compiled by Bloomberg approximate new credit in China fell by as much as 931 billion yuan (A$171bn) in the second half of 2013, the biggest drop since figures began in 2002.

Pepper Home Loans predicts the restricted environment in China could lead to an increase in investment in Australian property.

“Australia represents the perfect place for Chinese investors to obtain finance for real estate purchases,” said a statement on the lender’s website. “This means lenders throughout the country are likely seeing increased activity from foreign buyers, and will continue to do so for the foreseeable future.”[sam id=36 codes=’true’]

According to estimates by the Chinese-language Juwai web portal, Chinese investors spent a total of 5.4 billion yuan (A$992m) buying houses in Australia as of the end of 2013.

The site estimated that 63.1 million Chinese possessed the financial capacity to purchase housing overseas and that these people were conducting some 90 million searches online for housing every month.

Aviate managing director Neil Smoi said foreign investors purchasing residential property in Australia are having an increasing impact.

“The relatively simple path for overseas investors to purchase property in Australia can be expected to come under further scrutiny, particularly given the falling number of first home buyers in the market at the moment,” said Smoli.

“It is difficult to see any real respite for first home buyers from an affordability perspective, hence we expect loans to investors to continue to outstrip those to first home buyers over the next 12 months.”

The gradual increase in the proportion of loans arranged for investors has risen steadily in recent times. Where investors would typically account for 20%-30% of new mortgages, the aggregation groups Aviate is aligned with now suggest this proportion is just shy of 40% and could potentially rise further.

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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


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