Chinese Investment and the Australian Property Market: Myths and Realities

Recent debates in the Australian real estate market have centered around the impact of Chinese investors, with many Australians believing that Chinese buyers are a significant driver of property price increases. Yet, recent studies and market observations have begun to challenge this widely held belief.

A survey conducted by the Australia-China Relations Institute at the University of Technology Sydney found that 73% of Australians believed that “foreign buyers from China drive up Australian housing prices”. Contrastingly, a study in the journal Housing Studies revealed that the decline in Chinese investment following Beijing’s 2017 crackdown on capital outflows had minimal impact on Australia’s property prices.

Associate Professor Song Shi from the University of Technology Sydney, co-author of the study, pointed out, “Our findings… suggest ongoing concerns about Chinese capital and Chinese investors driving up Australian home prices and exacerbating affordability problems are overstated”. Dr. Mona Chung, director of consulting firm Cross Culture International, went further by labeling the perception of Chinese influence on property prices as a “media myth”.

Indeed, while Australia has seen a considerable increase in Chinese migration since 2011, experts argue that other factors, such as low interest rates and supply shortages, have played a more significant role in the property boom. Dr. Shane Oliver, chief economist at financial services company AMP, emphasized, “Foreign buyers have an impact on property prices, but it is relatively minor”.

In a related development, the Australian property landscape is experiencing a shift due to the ongoing property crisis in China. Major Chinese developers such as Poly, Greenland, and Country Garden, who entered the Australian market with significant investments in the past decade, are now retracting their operations. Their exit is primarily attributed to financial challenges back home.

“Chinese property developers have had a tendency in the past to build high-density dwellings… It does mean that those high-density towers that we actually do need, we’ll see less of those over the next two to five years,” property analyst Louis Christopher observed.

The exit of these developers will likely impact the number of new homes coming onto the market. This is concerning, as the federal government has set ambitious targets for dwelling completions in the upcoming years.

Simultaneously, China’s property sector, which accounts for over a quarter of its GDP, is undergoing its longest downtrend since the late 1990s2. In response to the downturn, the People’s Bank of China has introduced property-easing measures. However, some economists believe that further policy rate cuts are required to stabilize the market.

In conclusion, while Chinese investors have had a presence in the Australian property market, their influence on property prices might not be as profound as widely believed. Furthermore, as Chinese developers navigate their domestic property crisis, Australia may see a shift in the type and quantity of housing projects in the future.

References:

“Experts debunk myth that Chinese buyers drive up Australian property prices” by Jonathan Pearlman. ↩ https://www.straitstimes.com/asia/australianz/experts-debunk-myth-that-chinese-buyers-drive-up-australian-property-prices

“Chinese developers exit Australian market as property crisis worsens in China” by Samuel Yang. ↩ https://www.abc.net.au/news/2023-09-15/chinese-developers-exit-australia-property-meltdown-in-china/102855266