Up to half of Chinese buyers leave apartments vacant
A quarter of Chinese buying property overseas leave their apartments vacant and the majority pay for their purchase with cash, a survey of mainland Chinese customers by investment bank UBS shows.
Another 25 per cent of overseas property owners use their home on a temporary basis, suggesting about half of the overseas properties owned by mainland Chinese were not fully utilised, the bi-annual survey suggests.
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Overseas investment in Australia’s housing market has stirred political sensitivities amid concerns offshore buyers are helping fuel Australia’s property boom and are leaving homes empty during a housing affordability crisis.
House prices in the nation’s capital cities have surged almost 44 per cent since 2012, according to the Australian Bureau of Statistics.
The rush of offshore buyers – who are limited to purchasing newly built property – has also sparked an apartment boom in east coast cities.
Up to 25,500 apartments will be completed in Sydney this year, with a further 16,700 in Melbourne and 10,600 in Brisbane, analysts Charter Keck Cramer estimate.
Under pressure to show foreign-ownership rules are working, the Australian government has also cracked down on the established housing market.
In February, it ordered the sale of 15 homes illegally acquired by overseas buyers ranging in price from $140,000 to $5.9 million.
The UBS housing survey showed 63 per cent of Chinese consumers with an overseas property held them for investment purposes, with about two-thirds of those rented out.
The survey, conducted with Chinese consumers bi-annually, includes questions about buying intentions and purchasing habits overseas.
The top five international preferred investment destinations were Hong Kong, Singapore, Japan, Canada and Sydney.
“The majority of overseas properties were purchased using cash,” the report’s authors, led by analyst Kim Wright, said.
“Those who buy for investment and leave vacant may be seeing the property as a store of wealth and potential capital appreciation,” she said.
The survey follows news this week of China officially putting the brakes on businesses speculating in overseas property development, as they were “not the real economy” and could harm China’s financial interests by increasing capital outflows.
Melbourne-based developer and director of Evolve Developments Ashley Williams said restrictions on lending to foreigners by local banks and increases in stamp duty had “slowed” activity.
“Things are a little slower than they might be but that’s a function of lending and stamp duty concerns,” he said.
The prospect of an imminent apartment oversupply in Melbourne was overstated.
“Oversupply is skewed to a couple of super high-density locations rather than being through the whole market,” he said.
Capitol Grand developer and former Dodo entrepeneur Larry Kestelman said if Chinese and other investors pulled out of the market it would impact on renters.
“A lot of apartments on market for rent are owned by overseas investors. If they back out, the rental market will become more heated,” he said.
“The overseas buyers have definitely slowed up, without a doubt.”
But Australia’s tougher banking and regulatory requirements and Chinese government restrictions on citizens moving money offshore haven’t dampened Chinese consumer demand or their intention of buying overseas in the next two years.
“Our survey shows a rising trend of mainland consumers owning residential property abroad, notable given our survey doesn’t capture high net worth consumers,” the authors said.
“Two-thirds of those who are active suggest China’s tightened capital controls haven’t deterred them.”
A good investment environment, a big Chinese population, lifestyle changes, and law and order were key considerations for purchasing property abroad.
“Interestingly, children’s education has slipped in importance compared with past surveys, although not statistically significant,” UBS said.