Why have Chinese people rushed to buy and develop residential property in key selected areas of Sydney and Melbourne, as well as other places?
The development thrust to satisfy the thirst for Chinese buyers is starting to create an oversupply in the apartment rental market in Melbourne, which could spread to Sydney. However, the vacancy rate will be curbed by the fact that many Chinese do not put their properties on the rental market.
A big slab of the Chinese money being used to buy Australian dwellings has origins that are suspect. Some of the money -- but certainly not all -- was generated by corruption.
Australia might have a great climate and be friendly to Chinese (despite Clive Palmer’s rantings), but dwellings are available in the US that are much more attractive from an investment point of view.
This week I discovered why so many Chinese are nervous about buying in the US and why Australia has attracted those big slabs of money that were originally earmarked for America. Much off the dwelling investment money that comes out of China is controlled by people who are looking to obtain a residential qualification so that they have a place to go should the environment in China turn nasty. In many cases the Chinese who are sending money out here to buy dwellings have aspirations to have residential qualifications. They turned away from the US because President Obama passed legislation that requires people gaining a US green card to disclose all their sources of global income.
For many Chinese, especially those with corrupt income to hide, this made the US a dangerous place to seek residency.
Australia is much more flexible and so we received and still are receiving, more than our normal share of Chinese property investment income albeit concentrated in selected areas of Sydney and Melbourne. Will it continue? So far, the anti-corruption campaigns in China have not slowed the money flow into Australia and, in time, China will want to encourage investment in Australia. Of course if China ever got really tough on the people who have sent money abroad then we would see some selling but there is no sign of that taking place. Instead the money keeps coming. Yesterday I was yarning to a Sydney executive who has just seen a neighbouring house bought by Chinese for $2.5 million. No one now lives in it. It might seem strange, but for many Chinese with money gained through corruption, investing in property makes sense. And Australia is a very attractive market for them.