Monday, March 10, 2014

Chinese investment in Australian rental housing

There's been a lot of talk lately about Chinese buyers buying up Australian housing – and pushing up house prices.

Most of the talk is based on mere anecdote; Credit Suisse has tried to put some numbers on it, and estimate that Chinese buyers spent about $5.5 billion on Australian residential property last year. Credit Suisse's researchers – like the other commentators – conclude:

A generation of Australians are being priced out of the property market. Many face a lifetime of renting.

Let's put Chinese buyers into perspective. Last year Australian banks lent landlords just under $100 billion to spend on Australian housing. A very small part of that – necessarily less than $5.5 billion, probably much less – may have gone to Chinese buyers, but very largely that $100 billion went to Australians becoming landlords.

Another thing: most purchases by Chinese buyers (about $3 billion of the $5.5 billion) worth are subject to Foreign Investment Review Board rules, which restrict purchases to new construction or properties for redevelopment – in other words, new housing supply. Now, there is a question mark over how well the FIRB enforces those rules. There is, however, no such question in relation to Australian landlords, because there are no restrictions. About 93 per cent of that $100 billion borrowed last year went to purchase existing dwellings.

By and large, it is Australians who are pricing other Australians out of home ownership. 

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