Chinese investors are expected to pour about $60 billion into Australian housing over the next six years, more than double the $28bn spent in the previous six.
Research from Credit Suisse estimates that investment from China will soar despite extra regulations to be placed on foreign investment into residential property.
Chinese buyers spent $8.7bn on Australian housing in the year to June 2014, well up on the $5.4bn spent the previous year.
“While new foreign investment proposals may make Australian real estate less attractive for the Chinese buyer, we believe the potential erosion of demand will be marginal,” the report said.
“More importantly, the proposals should refocus foreign investment demand into new housing and away from established. This is positive for the Australian economy, in our view.
“Our forecasts are considerably larger than those from a year ago. This is mostly because we are starting from a much higher base than we expected back then.”
Most of the investment was going into Sydney and Melbourne, pushing up house prices in those cities, the report said.
“Current (Chinese) demand for Sydney is now the equivalent of 23 per cent of new supply. It was 18 per cent last year. In Melbourne, Chinese demand is running at 20 per cent of new supply,” Credit Suisse said.
“If Chinese buyers are on the verge of snapping-up the equivalent of a quarter of new supply, we can see why house prices in both cities have outpaced income growth.”
The Victorian government’s decision to levy an additional 3 per cent stamp duty for foreign buyers is expected to shift more investment to Sydney, pushing up house prices further.
“We imagine the potential increase in fees to buy a Melbourne property would drive the marginal buyer to other Australian cities, such as Sydney, where charges are lower. A tax in Victoria could make Sydney house prices even more expensive.”
This article first appeared in The Australian Business Review