There are ‘mixed feelings’ by many Australians on the surge of Chinese investment in the Australian residential and commercial property market. Many ask the question – will the surge of Chinese investment in Australia real estate continue? Despite the announcement of new penalties by the Foreign Investment Review Board (“FIRB”), Chinese investment will continue to grow in the second half of 2015.
Redwood Advisory believes there will be continued demand due to not only the Chinese desire for property, but also the impact of the exchange rate between AUD V CNY and the fact that the Chinese see Australia as a safe place to invest and a great way to diversify their investment portfolio.
Chinese love affair with Australian property
The impact of Chinese investment in Australia was revealed in the latest report. In 2013-14, approved proposed investment was $74.6 billion, with China ($27.7 billion) with the largest source of approved investment with $12.4 billion invested in real estate, Malaysia and Singapore followed with $7.2 and $7.1 billion respectively. The power of the Chinese is evident.
Redwood Advisory believes the introduction of fees for foreign investors and recent taxes by the Victorian Government will not deter foreign investment as there are a number of factors that impact the decision by the Chinese to invest in Australian property, such as local schools, lifestyle and established Chinese communities.
Chinese demand for Australian property continues to grow and the Australia property market will need to provide the supply to keep up with Chinese demand. There is no stopping the Chinese; their economy continues to grow and Australia is targeted as a safe place to place to invest for wealth creation.
Chinese Investment Case Study – Glen Waverley, VIC
Residing in Glen Waverley and investing in the suburb for the last 15 years, Redwood Advisory’s Director Ivan Filipovic comments on why Chinese are choosing Glen Waverley as a favoured destination.
The attraction of Glen Waverley is that it possesses one of the states best public schools – Glen Waverley Secondary College as well as two of the best private schools in Wesley and Caulfield Grammar. In addition, the existing Chinese community brings a ‘local’ feel to the Chinese with a number of Chinese Grocery, Travel Agencies and Restaurants. The surge of Chinese Investment has changed the dynamic in many ways including the famous Kingsway café strip.
According to RP Data, since March 2013, there has been a 63% increase in the median sale price, currently $1.23 million in March 2015. The increase is higher than neighbouring suburbs and can be attributed to Chinese investment in the area.
It is not just residential property being purchased; commercial property is also favoured by Chinese investors. For example, 88 Kingsway, on the market for the first time in 50 years, sold for $3.61 million (rental yield of 1.8%).
A favourable exchange rate
A favourable exchange rate will continue to support the growth of Chinese investment in the Australian property market. In May 2013, the AUD V CNY was 6.31, it is currently 4.31. The 31% decline of the Australian Dollar has has improved the purchasing power of the Chinese – that is Chinese have more money to spend and Australia is a cheaper market to invest in. This trend is likely to continue.
Will it continue?
Redwood Advisory believes Chinese appetite for Australian property will continue to surge into 2016 potentially pushing property prices higher in major capital cities. FIRB figures represent ‘approved investment’ not only ‘actual investment’ of which Chinese represent 59% of total approvals – a clear representation that Australia is
for Chinese investment. Recent changes by the FIRB targeting illegal investment will be retrospective and not deter future investment.
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