Andrew Taylor | 9 September 2014

The surprising truth about Chinese buyers: Five must-know facts

The surprising truth about Chinese buyers: Five must-know facts

GUEST OBSERVATION

There are four relatively uncontroversial things I believe to be true about Chinese buyers.

But you'll be surprised by the fifth.

  1. I have no doubt that Chinese buyers are a much bigger presence in the market today than just a few years ago.
  2. I know for a fact that Chinese buyers have spurred much new construction in Australia - thus adding to the stock of homes on the market and creating jobs and tax revenue.
  3. I trust the data from various sources that reveals Chinese buyers to this year be the largest foreign buyer group in Australia.
  4. I know that Australia can expect Chinese investment to increase in the coming five to 10 years. As China relaxes its capital controls, the flow of money to Australia and other countries, according to the Bank of England, could triple.

    Now for the surprising fact.

    Anyone who pays attention to the real experts, such as Glenn Stevens of the Reserve Bank of Australia, already knows this last truth.

    Drum roll, please.

  5. The fifth thing I know: Chinese buyers are not distorting the Australian real estate market.

With all the media hyperventilation suggesting the contrary, how could I possibly know this?

It's because Chinese are foreign investors, and total foreign investment is down significantly. The total of Chinese investment into Australian real estate is nowhere near large enough to make up for last year's decrease by other nationalities.

That's right. The total amount that all non-Chinese foreign investors transferred into the bank accounts of Australian property vendors last year actually decreased.

It didn't decrease by a little. It decreased by $8.2 billion.

Those British, American and other foreign investors haven't disappeared altogether. Even so, there aren't nearly as many of them as there were just 12 months before.

Yes, Australia, as a fellow countryman, I know it can be hard to accept, but last year foreign buyers did a runner.

From $54 billion in 2012, non-Chinese foreign investment plummeted down to $46 billion.

The Chinese valiantly tried to make up the difference, but they fell several billion short. As someone once said, "A billion here, a billion there and pretty soon you're talking about real money."

Perhaps that's why the governor of the Reserve Bank of Australia has gone on the record with his belief that the Chinese aren't having any real impact on prices.

That doesn't mean Chinese buyers aren't important. Quite the contrary: they are more important than ever. But the Chinese, as a subgroup of all foreign buyers, are far from distorting the market.

For foreign buyers to push prices up in Australia, presumably their total demand would have to go up. And –even when you include Chinese buyers– total demand from foreign investors plummeted last year.

Whatever price rises we're seeing, then, have to be due to other factors. The prime contenders seem to be wage growth, investor demand and low interest rates, but that's the subject of another story.

Andrew Taylor is the founder and CEO of sales and marketing of Juwai.com, the number-one Chinese real estate portal for property in Australia and around the world. Find out more about him at list.juwai.com.