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The Chinese Phenomenon dominates. Aussie homebuyers crunched by Chinese investors.; Australia is in a housing bubble amid property price surge, says investment banker
Topic Started: 9 Oct 2015, 04:46 PM (1,381 Views)
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Aussie homebuyers crunched by Chinese investors

Oct 5, 2015, George Lekakis Reporter

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Purchasing power of young borrowers takes a big hit as foreign buyers move in.

One of the country’s leading property consultants warns that thousands of young Australians are being shut out of the housing market this spring auction season as aggressive foreign buyers bid up the value of inner suburban property.

Mal James, the principal of Melbourne-based consultancy James Buyer Advocates, believes that Chinese property investors are helping to ramp up the cost of houses across Melbourne.

In a recent newsletter distributed to clients, Mr James said investors from mainland China were having a far-reaching impact on property prices.

“The ‘Chinese Phenomenon’ dominates our inner east market and is starting to have a major influence on our bayside market,” Mr James said.

“This has significant spill over to other Melbourne markets and other price brackets. We do not see this ending anytime soon.”

While property buyers from mainland China are mostly targeting residential properties that fetch more than $1 million, their willingness to pay big premiums on seven-figure properties was forcing high-income domestic investors to eye houses in middle-class suburbs.

That, in turn, was putting a big squeeze on young couples hoping to acquire a house in the eastern suburbs of Melbourne.

“Buyers need to understand that despite some recent press implying the ‘Chinese Phenomenon’ is no big deal – it is, it really is,” Mr James said.

“It’s bigger than underquoting, bigger than off the plans, bigger than The Block and other shows, and bigger [for many] than interest rates right now and near on as big as the issues of negative gearing and high density living.”

Under Australian laws, foreign investors are banned from acquiring established residential property unless they are temporary residents and plan to use the house or apartment for their own accommodation.

Foreign buyers can, however, purchase new housing for investment purposes.

All property purchased by foreigners must be approved by the Foreign Investment Review Board (FIRB).

In 2014, the value of local housing property acquired by foreigners exceeded $30 billion, which was about 40 per cent higher than 2013.

Research collated by the FIRB indicated that most of these purchases related to new property and were therefore legal, but the official figures do not appear to reflect the buying trends highlighted by Mr James’ firm.

The Federal Government was also concerned that the official data was not accounting for many illegal transactions, with the Australian Tax Office now investigating more than 500 suspicious property trades.

Read more: http://thenewdaily.com.au/money/2015/10/05/aussie-homebuyers-crunched-chinese-investors-expert/
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Australia is in a housing bubble amid property price surge, says investment banker

By Shayani Mukherjee, October 02 2015

An investment banker has warned home buyers in Australia that property prices would continue to rise in future but the Federal Government will not do anything to burst the bubble because Australia "simply can't afford it."

Australia could witness coming in of new money if China’s market shows any signs of instability, Saxo Capital Asia's macro strategist Kay Van-Petersen has said. The prices of housing property in Australia, especially in Sydney and Melbourne, have been extremely high, going beyond many people’s capacity. For instance, the median house in Sydney was sold at AU$1 million in July.

Van-Petersen said that the Australian government has to first acknowledge that the market was “inflated” and also try to control the escalating price rise through best possible means. "If they wanted to prick it, they could, but Australia simply cannot afford to,” he said.

"Australia can't afford for property to have a hard landing. If housing prices bust, the banks will get hit hard. And then what is there? It's in everyone's interests right now," Van-Petersen added.

According to the Sydney Morning Herald, house price rate has risen by 9.8 percent this year and the maximum growth (4.7 percent) was marked in between March and June quarters. American multinational financial services corporation Morgan Stanley believes that prices have reached a point from where it could no longer increase. On the contrary, Van-Petersen argues that housing prices will continue to surge, more so when the government wouldn’t be doing anything about it

Van-Petersen also cited examples of strong policies of adjustments adopted by New Zealand and Singapore and advised the Australian government to reduce the high stamp duty tax it charges from the foreign property buyers from properties of more than AU$15 million.

Investment bank Goldman Sachs estimated that the markets in Sydney and Melbourne were overvalued by 20 percent. The warning comes in a phase of economic slowdown, where trade has lessened and mining companies have faced a plunged market value amid tumbling commodity prices and a slowing China.

The International Monetary Fund (IMF) has also raised its voice on Australia's property prices and whether the country is in a potential housing bubble. In a report released by IMF on the Australian economy, it has warned Australians of facing a potential housing bubble and has advised it to invest in infrastructural development to meet the housing shortage.

"Buoyant housing investor lending has recently prompted regulatory action to reinforce sound residential mortgage lending practices," the report stated.

Read more: http://www.ibtimes.com.au/australia-housing-bubble-amid-property-price-surge-says-investment-banker-1471416
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Tick Tock
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In typical OZ fashion nothing will be done about this until its all too late.

Then everyone will have to pay for the consequences.
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John Frum
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It appears we're not unique in regard to the great China cash buy-up. Front page article on Marketwatch today:

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Chinese all-cash buyers of U.S. homes have tripled since 2005

Mandarin-speaking Chinese are buying mostly high-end homes with a median price of over $500,000

Xiāoshòu. That’s how you say “For Sale” in Chinese. And if you’re selling to an all-cash buyer in a U.S. real estate deal, you may need to find a real-estate agent who speaks Mandarin.

A joint analysis by Irvine, Calif.-based realty research firm RealtyTrac, and New Jersey-based multicultural marketing company Ethnic Technologies, found that 46% of Mandarin Chinese-speaking buyers who purchased U.S. homes in the 17 months ending in May 2015 paid all cash, more than triple the number paying all cash in 2005. Overall, Mandarin speakers are the second largest non-English speaking cash-paying group, totaling nearly 18% of all cash deals, second behind those buyers speaking Spanish at 43%.

Among all non-English speaking groups, the share of all-cash buyers of U.S. homes increased from a 20% share in 2005 to a 33% share in the 17 months ending in May 2015.

The two firms looked at 10 million publicly recorded residential property sales deeds in 2014 and 2015 compared with 2005 by ethnicity and native language spoken. The results were determined by predictive software that can determine ethnicity and language preference based on first name, last name, and address of the record, according to Lisa Radding, the director of research for Ethnic Technologies.

“Cash buyers across the board are playing a much bigger role in the housing market now than they were 10 years ago, and that is particularly true for Chinese Mandarin-speaking cash buyers, who are more likely to be foreign nationals,” said Daren Blomquist, vice president at RealtyTrac. “Foreign cash buyers have helped to accelerate U.S. home price appreciation over the past few years given that these buyers are often not as constrained by income as local, traditionally financed buyers,” he said.

Indeed, median home values in the U.S. have risen to $180,800, the highest level since mid-2008, and up 3.3% in the past year, and they’re projected to rise another 2.2% in 2016.

Chinese Mandarin-speaking buyers also increased as a share of overall buyers more than any other language group between 2005 and 2015, up more than 9%, according to RealtyTrac. Other languages spoken increasingly by buyers were Hindi and Arabic, the research firm said.

Overall, Chinese buyers spent $22 billion on U.S. housing in the 12 months through March 2014 — 72% more than a year earlier, according to the National Association of Realtors, buying mostly high-end, expensive homes with a median price of over $500,000. Asian buyers make up more than a third of all international real estate buyers in the U.S., and Chinese investing in U.S. real estate is so popular that the Washington, D. C-based Association of Foreign Investors in Real Estate (AFIRE) offers its guide to real-estate investing in the U.S. in only two languages, English and Mandarin.

Also see: The danger of foreign buyers gobbling up American homes

OB Jacobi, president of Windermere Real Estate, a real-estate broker in Seattle, said that Chinese buyers account for almost half of all real estate activity in Seattle’s most expensive neighborhoods and says more than three-quarters of the real estate deals there are for cash. “Seattle is the closest mainland U.S. city to travel to from Beijing and offers things that really appeal to the Chinese, like clean air, quality education, and employment opportunities with several Fortune 500 companies,” Jacobi said. Seattle home prices rose 12% in the past year, and are expected to climb another 6.4% through 2016.

Ohio, Colorado and Southern California too are seeing plenty of all-cash Mandarin-speaking buyers, according to RealtyTrac and Ethnic Technologies.

“Annually since 2005, we have seen that destabilizing events around the world continue to increase the positioning for U.S. real estate, particularly Southern California, as a safe harbor for investment, particularly cash,” said Mark Hughes, chief operating officer with First Team Real Estate, a Realtor covering the Southern California market. “Given the somewhat laid-back Chinese government attention to withdrawal limits we expect these funds to continue to be a driver of activity and bidding throughout this year.”

http://www.marketwatch.com/story/chinese-all-cash-buyers-of-us-homes-have-tripled-since-2005-2015-10-09


We do however need to get a perspective on all of this China property frenzy. Most of us over the age of 40 remember the property buying spree that the Japanese went on in the 80's and how that turned out. This article, although from 5 years ago, serves to highlight the similarities between Japan and China's boom that are even more relevant today:

http://blogs.reuters.com/gregg-easterbrook/2010/08/18/china-as-number-one-remember-japan-in-the-80s/


No doubt there'll be a lively thread here on this very subject straight after Monday's 4 Corners piece:

http://www.abc.net.au/4corners/stories/2015/10/08/4327525.htm


Edited by John Frum, 10 Oct 2015, 09:28 PM.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness.
"Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
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newjez
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Same effect in most major cities of the world. It is interesting that they target the 'big five' of cities. They aren't interested in small fry. 70 miles from London and I feel the effects. But it is aftershock, not the Chinese themselves. Things must be really shit in China. Are we thinking civil war and regime change?
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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Ex BP Golly
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It was a stupid idea to try and stimulate a consumer economy in China when all you can offer for sale is a cheap dunny brush that breaks after two or three uses.
It just meant creating a local service sector that sent all those slave earnt RMB offshore to gucci, prada, serge lutens, bmw etc.



Edited by Ex BP Golly, 12 Oct 2015, 08:37 AM.
WHAT WOULD EDDIE DO? MAAAATE!
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Ex BP Golly
12 Oct 2015, 08:36 AM
It was a stupid idea to try and stimulate a consumer economy in China when all you can offer for sale is a cheap dunny brush that breaks after two or three uses.
It just meant creating a local service sector that sent all those slave earnt RMB offshore to gucci, prada, serge lutens, bmw etc.



Yes it's all about value added. You can't escape middle income trap without value added.

The strength of Chinese is big infrastructure projects in rail, ports, telecoms, bridges, housing, etc.

They should have focused on that and sold it to third world looking for cost savings. But they ran out of money or squandered political capital and trust with their imperialist ambitions.

Should have also started slow on the consumer society with cheap social housing as a foundation for building a consumer base. But they squandered that too with luxury condos for specufestors.

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Ex BP Golly
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Comrades in golden towers hey!
Totally missed the plot.
It's one thing to have a command economy, it's another to know how to use it.
They sought to lower the angst from the rising aspirational hopes that beset them, and fanned the fires instead.
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