Chinese Demand for Residential Property Downunder Eases: RBA

Chinese demand for Australian residential property has eased due to tighter capital controls imposed by the Chinese government and tougher restrictions on mortgage lending by local banks.

In a speech at the Australia-China Property Developers, Investors and Financiers lunch in Sydney, Reserve Bank of Australia (RBA) head of financial stability Jonathan Kearns noted that purchases by foreign buyers make up around 10 to 15 per cent of new construction or around five per cent of total housing sales and around one-quarter of newly built apartments.

“Many foreign buyers come from China, seemingly around three-quarters” Kearns said.

Purchases of new properties by foreign buyers have eased over the past year, thanks to stricter enforcement of Chinese capital controls and tighter access to finance for foreign buyers.

With housing affordability a serious issue in Australia purchases by foreign buyers is a controversial topic, due to rising house prices and complaints first homebuyers cannot break into the market.

Kearns noted that purchases by foreign buyers do not, on the whole, reduce the supply of dwellings available to local residents and in fact may actually contribute to the expansion of housing stock.

Non-residents are able to purchase newly constructed dwellings in Australia, while temporary residents, such as those in Australia for work or study are able to purchase an existing dwelling for their primary residents.

Earlier this month New Zealand imposed a ban on foreign buyers from purchasing existing homes in an attempt to reduce demand and ease affordability issues created by the country’s surging house prices.

“Foreign buyers in Australia for work or study would have been renting if they did not purchase,” Kearns said.

“Other foreign buyers rent the property as an investment and so contribute to the rental stock”

Kearns also importantly noted that there are some new developments that only proceed because they get high pre-sales from foreign buyers.

he strength of the Australian property market, and the participation by foreign buyers, has also enticed some foreign developers to Australia for specific projects, but overall they remain a small part of the market. Foreign banks also have a very small role in residential property lending in Australia.