Experts: Chinese not to blame for Australia's home prices

By Karl Wilson in Sydney (China Daily) Updated: 2014-11-09 08:40

Wilson reminded the inquiry that about one in 10 citizens or permanent residents had at least one Asian parent and had as much right as anyone to buy property. He said there were not the same concerns about people of Greek and Italian heritage buying homes.

The FIRB rules allow foreign non-residents to purchase off-the-plan housing in a bid to boost supply, but precludes them from purchasing established homes. By contrast, temporary residents are allowed to purchase established homes, but are required to sell them within three months of leaving Australia.

The FIRB has also admitted that it is incapable of monitoring whether a foreign temporary resident has sold his home within three months of departing Australia, and therefore unable to enforce the rule.

Monika Tu, whose company Black Diamondz Property Concierge mainly handles wealthy Chinese clients, says: "Our clients are buying because they are moving here to live. They are high-net-worth people who are seeking a new home here in Sydney."

Tu's clients are not interested in purchasing flats in the suburbs, she says, but in spending A$5 million to A$10 million plus on waterside properties with harbor views or views of the city.

"They are buying a lifestyle and are making a commitment to Australia," she says. "It's not just an investment."

The rise in domestic house prices in Australia, while marginally impacted by Chinese investors, is a result of low interest rates, increased affordability and domestic investors, not foreigners, said Deutsche Bank economist Phil O'Donaghue in a research note.

"The point that gets lost in this debate very often is that nobody focuses on the rules, which are pretty clear for a foreign investor. The principle that guides the FIRB policy is that foreign investment should increase the housing stock," O'Donaghue said.

Brokerage CLSA, in a report titled "The Magic Dragon: Chinese Investment and Oz Housing", says Australia has now become "an important destination for Chinese investment in residential property".

It says there are a number of drivers behind the growing interest, the most important of which has little to do with simple investment choices.

"A key reason is increasing emigration options, by having property in the preferred destination country," the report says. "Diversifying investment portfolios is another important motive.

"The Chinese want housing for their student children and a home, if they are eventually able to emigrate."

In addition, China Reality Research's "Dare to Dream" report identifies why Chinese are looking to emigrate: 64 percent cite their children's education and 42 percent want a clean environment.

Credit Suisse says Chinese buyers are spending A$5.4 billion a year on Australian properties, with much of it concentrated in Melbourne and Sydney, although there is growing interest in the northern state of Queensland.

"While Australia has some of the most unaffordable housing in the world, further strong Chinese demand can push prices even higher," the financial services firm says in a note. "The emergence of the global property investor means that valuation methods like house price to local income ratios are becoming obsolete."

Residents of central London have known this for some time, the report says, adding that this includes well-paid investment bankers struggling to buy in a market where many of the owners are wealthy individuals from the Middle East, North Africa and other parts of Europe.