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Why Chinese buyers are still looking at Australia and New Zealand
By Juwai, 02 January 2019
Chinese buyers look set to increase their demands in Australia and New Zealand during the coming 12 months.
Here Carrie Law, the Chief Executive Officer of Juwai.com, gives her opinions about what these two cuntries can expect from Chinese property buyers and investors during 2019. She wrote: The beginning of the year provides an opportunity for people to take a deep breath, step back from the fast-paced action of day-to-day life, and think about the long- term. That’s why the most frequent question I am asked these days is about the 2019 outlook for Chinese property buying.
Here I try to give you some insight into what to expect in your local market.
Reliable Chinese Buyers Still Like Australia and New Zealand
In Australia, a Chinese buyer paid AU$4.5 million late last year for a second-hand downtown apartment in Brisbane. That’s more than any other apartment has ever changed hands for in the Abian. The sellers, who had purchased the unit off-plan, made an easy $500,000 in profit - even after investing $200,000 in renovations.
In New Zealand, a 24-story Miami-style apartment building planned for Auckland's North Harbour started a frenzy among local and Chinese buyers when it was advertised online. Chinese buyers snapped up 20 apartments per week at the building, which will likely be called No 1 Kaipiho. Some types of apartments have sold out entirely.
These examples, and many others, show Chinese buyers are still important in both Australia and New Zealand. They help soften the blow of a slowing property market for sellers who are desperate to obtain as much value as possible for their homes.
Our estimate is that - when the dust has settled, and the final counting is done - mainland Chinese buyers will have spent as much as US$129.3 billion on global real estate during 2018. That’s a growth rate of between 3% to 8% over 2017 levels. For New Zealand and Australia, we think Chinese buyer growth during 2019 will be flat. Given local market conditions and global economic risks, we don't see foresee rapid Chinese buyer growth in these countries during 2019.
These numbers are all the more remarkable when you realise they have grown from nothing within the last decade. The first year that Chinese property buyers really began to be noticed on international real estate markets was 2010, and during that year they only bought US$5 billion of real estate - most of that was commercial.
It’s a good thing for local markets that Chinese buying is not expected to drop away during 2019. That’s because Chinese are the most spendthrift of foreign buyers. They account for more than one-fifth of foreign buying in both Australia and New Zealand.
Chinese buy more Australian property then nationals of any other country. In fact, they buy twice as much real estate as the next closest country. New Zealand nationals are still bigger buyers, but those from Greater China are number two.
Like Water Behind the Dam
Chinese wealth generation is the key motor driving the wheel of investment. Even though China’s growth rates are no longer the 10%, and higher, that they recently were, they are still twice what’s now prevalent in Australia and New Zealand.
The investment bank Credit Suisse counts 1.6 million U.S. dollar millionaires in mainland China. Because of their prosperity, these individuals dominate the buying of international property. They currently hold AUD$13 trillion of assets, and their assets have grown by about 16% every year since 2011.
On a population-wide scale, wealth-per-adult has more than quadrupled over the last six years in China.
Consider that for a moment. Put yourself in their shoes and ask yourself, “If I were Chinese, how likely is it that you would be able to buy an overseas second home if you now had four dollars for every one dollar you had six years ago.”
That’s how fast the economy is growing in China.
It’s not just their swelling bank accounts that explains Chinese property purchases. It’s also the fact that they tend to trust real estate more than other assets. Because of low interest rates, volatile stock markets, and limited investment opportunities, Chinese put their savings into real estate at higher rates than other nationalities.
Property today accounts for 53% of wealth held by Chinese adults.
Other research also suggests that Chinese demand for international property will only increase until at least 2025. In a 2018 survey, Chinese overseas investors named residential property their favourite asset class.
The question for Australia and New Zealand is this.When will Beijing relax the restrictions that make it harder for Chinese families to move more money overseas to buy real estate? When they do cut the red tape, you can expect to see a surge in investment in Australia and New Zealand.
This article was written by Carrie Law, the Chief Executive Officer of the number one Chinese international real estate portal, Juwai.com.