Chinese investment will continue to flow into Australia’s housing market despite tighter mainland capital restrictions, with real estate portal Juwai predicting levels will peak again despite a near-10 per cent fall in inquiries earlier this year.
Inquiries on the website for Australian property from potential Chinese buyers have fallen 9.7 per cent in the first half of this year compared with the first six months of 2016, according to a Juwai.com spokesman.
“It’s down on last year, but it’s still going to be the second or third biggest year (for inquiries),” the spokesman said.
“It’s like going through the foothills — there are more peaks ahead.”
The comments come as Bloomberg reported that capital restrictions on money flowing out of the country had not stemmed Chinese interest in offshore investment. It quoted a Shanghai restaurateur saying he planned to carry money to Melbourne in a suitcase so he could buy a local investment property.
Shanghai restaurateur David Hu said he was nervous about wiring money to Australia for a home purchase because of China’s crackdown on currency outflows, Bloomberg reported.
The 61-year-old told the news agency that he intended to carry about $85,000 to Melbourne this month in a suitcase. The money was final payment for a deal struck last year.
“Buying a property abroad was and is still workable,” said Hu, though he described the process as a “lot more troublesome” these days.
Chinese applying for $50,000-a-year foreign exchange quotas must sign pledges that the money won’t be used for real estate. The regulation was brought earlier this year.
Major Chinese companies that have expanded rapidly offshore have come under pressure after a recent edict from Beijing to rein in debt.
Wanda, which is developing landmark apartment and hotel towers in Sydney and on the Gold Coast, has been shuffling its assets, last week announcing the sale price for one arm of the group.
It also saw a downgrade from global ratings agency S&P for two of its entities.
Meanwhile, investment bank UBS last week released a report adding Sydney to a list of global cities at risk of a housing bubble.
The bank warned of “elevated risk” in the city’s overheated housing market, singling out foreign investment as one of the factors fuelling price growth.
Australian regulators have been clamping down on investor and interest-only lending to take some heat out of the east coast capital property markets.
“Sydney’s housing market has been overheating since the city became a target for Chinese investors several years ago,” UBS said.
“Low interest rates, rising wealth and exuberant expectations also buoyed local demand. So valuations soared and pushed the market into bubble risk zone.”
A dip in prices in 2015-16 was short-lived, and real prices rose 12 per cent over the last four quarters to be 60 per cent higher than in 2012, UBS said.
Meanwhile, incomes rose by a “meagre” 2 per cent in inflation-adjusted terms, while tax breaks and interest-only loans were “whitewashing the worsening affordability for the time being”.
Around the world, bubble risk appeared greatest in Toronto, while Stockholm, Munich, Vancouver, London, Hong Kong and Amsterdam were also at risk.