It may or may not surprise you to learn that Sydney and Melbourne apartment prices are relatively ‘cheap’ compared with the median apartment prices in the major Chinese cities like Shanghai, where a two-bedroom apartment is around $900,000, which is about 25% more expensive that a similar one in Sydney.
What might surprise you is the level of investment from China into Sydney and Melbourne. It’s estimated at 25 per cent of all new homes in NSW and 16 per cent in Victoria in 2015-16, according to new research uncovered by Credit Suisse analysts. The team at Credit Suisse broke down the total foreign investment approval figures for NSW and Victoria residential real estate using state tax data they gained using freedom of information laws and found China dominates the list of foreign buyers and accounts for almost 80% of all the international demand.
Affordability Plus Security Driving Chinese Buyers To The Lucky Country
Chinese average incomes are much lower compared to here in Australia so affordability is a big factor as to why Chinese investors look so favourably on the Sydney and Melbourne markets.
Another reason is that investing in China is considered riskier than investing in Australia, with the Chinese Government able to seize property at a moment’s notice if they so choose.
The political environment in China is also uncertain, as it remains unclear as to how this communist country will deal with a growing divide between the new wealthy millionaire class, and the working class, who are finding their major cities less and less affordable.
Any Talk Of A Price Downturn To Be Softened By China: Suggests New Credit Suisse Research
Credit Suisse’s key research analyst Hasan Tevfik wrote in a recent research note Australian Investment Strategy: Shanghai? Shenzhen? Sydney! “We forecast Chinese demand for Aussie housing will continue to grow. It will be supported by Chinese wealth creation, attractive valuations (when compared to Tier 1 cities in China) and closer economic integration. While Australian housing is at peak cycle, we believe the pace and severity of the coming downturn will be cushioned by Chinese demand.” Mr Tevfik wrote.
Given the immense scale of China, where a very small percentage of the population can have a big influence on a local market, it’s hard to argue with the latest Credit Suisse research. Yet with any prediction, it remains to be seen how this will play out for the Sydney and Melbourne markets over the next few years.
