Chines Buyers - The Tide Is Rising

The flood of Chinese buying is still on its way. We have only seen the first light shower of interest in the Australian property market by Chinese buyers.

Economists generally, and property forecasters in particular, have continuously under-estimated the rising tide of influence out of China. Its impact on the world in general has been profound, coming from nowhere, in just the past two decades. Because this rise of economic power has been so startling, many in the west believe it must naturally be some kind of bubble.

Everyone is always forecasting the end for China. Yet it was China that was the anchor for the world’s economy during the Global Financial Crisis. Nowhere was this more noticeable than in the case of Australia. Virtually unscathed by the GFC, Australia was protected all along by a still booming China. Then of course, the RBA had to ruin things by being the only central bank in the world to be hiking interest rates. Still Australia continued to benefit from China managing its economy so successfully.

Now this is where it gets interesting. China has seen increasing tourism, education and investment heading Australia’s way. Of this, there is no doubt. Like everything else, most commentators see this as a temporary blip that will unwind. The process will continue however, because the sheer size of China, and the untapped potential that is still even now developing there, is beyond most economists comprehension.

We know there has been increasing investment in Australia, and that there is some concern about people walking away from deposits too, but this scenario is being overstated on a belief that property prices will be weak. There is certainly no evidence to support those constant negative assertions. The Australian market is very firm indeed.

As I like to say, there is more to come however. The Australian property market is about to get a further China effect boost, due to the strength of the Chinese market itself.

Property in China is now on average more expensive than property in the USA. The average price per square foot is now $171 in China, to the USA’s $132. Of course there are differences in quality. Most likely higher in China. Nevertheless, this highlights quite clearly, alongside booming new mortgages in China, that Chinese property investors remains keen to acquire while Australian property prices are no hindrance. Perhaps even a encouragement to them.

The Chinese buyer loves to buy in a rising market. The combination of a rising property market and increasing signs of a rising Australian dollar, are both likely to draw the attention of tens of thousands, perhaps more, Chinese investors who see their own market as well developed. They remain hungry investors, and can see the long term trend for Australian property for themselves.

Knowing their own country, they may well see the trend for Australia, better than we do.

Clifford Bennett