Overseas investment in Australian residential real-estate is unlikely to dampen in 2015 as Chinese buyers continue to snap up property amid flagging domestic demand, a property expert says.
Simon Henry, chief executive of international property website Juwai, which focusses on Chinese buyers, expects 15 to 20 per cent growth in international purchases of Australian real-estate this year compared to 2014.
“The Australian real estate market faces a number of headwinds, but luckily our analysis shows that international investment will make up for some of the loss in domestic demand” he said.
According to the Foreign Investment Review Board (FIRB), China was the number 1 source of foreign investment into Australian real estate in 2013. Chinese investors contributed $5.9 billion worth of property in FY 2013, up 40 per cent from the previous year.
Despite widespread concern that foreign investment was causing market distortions in the housing sector, a Federal Parliamentary committee report into affordable housing and foreign investment released in November found that housing supply issues would worsen if foreign investment was curtailed.
“The recent Parliamentary inquiry found that foreign investment is keeping prices lower and new supply of homes higher than they would otherwise be” said Mr Henry.
“In the context of Australia's slowing economy and income recession, the construction jobs, spending and tax revenues generated by international investors should be most welcome."
Researchers at Credit Suisse believe Chinese investors will spend $44 billion over the next seven years -- an average of $6.3 billion per year to 2020.
A more favourable exchange rate is likely to contribute to the growth in investment. Chinese buyers have received a boost to their purchasing power with the drop in the Australian dollar. In December 2009, 1 Chinese yuan bought approximately 16 cents. Today, it buys around 20 cents.
“It’s not just Chinese investment. The US dollar is rising, giving the yanks a boost in purchasing power. They are already typically one of the top two or three by total investment” says Simon Henry, co-CEO of Juwai.
Brian White, chairman of Ray White, Australia's largest real estate company said the outlook on Chinese investment is promising for the Australian property market.
"In 2014 it became evident that Chinese investors were serious about Australian property - particularly in Sydney and the Gold Coast. As the credibility of the Australian property market continues to strengthen in China, the level of investment will undoubtedly increase."
Ray White has opened offices in Beijing and Hong Kong to take advantage of the increased appetite for Australian real-estate of Chinese investors.
"Many of our Principals are thoroughly aware of the importance of having a Chinese specialist in their business and our offices are increasingly bringing Chinese expertise to their market place," Mr White said.