THERE are nascent signs Chinese foreign buyers have toned down their enthusiastic buying of Sydney property. There are three pinpointed causes.
Firstly, Beijing has narrowed the window for capital outflows to Australia. At the same time, Australian banks have tightened lending criteria to mainland China investors due to APRA regulatory requirements, and in some cases won’t lend to foreign investors at all.
This week Chinese local and international estate agents reported a sharp drop-off in sales over the last six weeks as new property taxes took effect after the NSW state budget.
From July 1, NSW doubled the stamp duty on foreign buyers to 8 per cent and increased the land tax surcharge from 0.75 per cent to 2 per cent.
It’s a little too early to say the allure of Australian property has gone, but the Chinese language property portal Juwai.com calculated searches on Australian property for sale are down a third in the first six months of 2017 compared with the second half of last year, while global searches were up.
The emerging trend coincides with a warning from a former US Federal Reserve official that our economy could be at risk from a housing market downturn if Chinese buyers retreat from residential property.
Dr Nellie Liang, who was in Sydney recently to share her views on financial stability with the Reserve Bank of Australia, said a “trigger” could be a reversal in international capital flows.
“When you have the outsiders buying properties, if the outside money pulls out and prices fall, there’s innocent bystanders who took on debt and end up under water, which could lead to defaults,” Dr Laing, a senior fellow at the Brookings Institution in Washington, said.
“China is such a big economy now, and they have links to other countries, including to Australia and Canada through the housing markets, that people need to be thinking about.”
The National Australia Bank property expert panel calculated foreign acquirers in the combined established and new property markets represented 17 per cent of all apartment buyers and 11 per cent of house buyers in the June quarter.
Chinese buyers make up the largest percentage.
Some experts believe official figures underestimate the real extent of foreign money pouring into Australian real estate because Chinese Australians and permanent resident holders act as conduits to buy property for friends and family back home.
Sydney has enjoyed a stellar run with Chinese purchases, but a 50 per cent sales outcome at last weekend’s major Sydney CBD off the plan offering was the lowest take-up in many years. And there are still record numbers of new apartments approved and likely to come onto the market.
Hopefully the cooling trend in Chinese buying interest is more a pause rather than a conclusion.