FHOC on Why Chinese Investment is Not Pushing Prices | FHOC

Perth WA - Increasing levels of Chinese investment have hit headlines for the previous years. Despite the undoubted benefits this has brought for the construction sector, media coverage has indulged in scare-mongering.

With reactions at times bordering on xenophobic, commentators have suggested that rich Chinese investors are pushing the ordinary Australian out of their own property markets. Most notoriously, last year Pauline Hanson made the news after insisting her agent find a White Australian buyer for her Queensland residence.

In such a climate following a 10% house price rise in the previous year and with record sums paid by Chinese buyers making the news, it is perhaps little surprise that the rise was blamed on Chinese buyers with cash to splash.

Chinese Investment Up, Overall Foreign Investment Down

Chinese buyers certainly will be the largest nationality group of foreign investors in Australian property this year, and ANZ estimate that the stock of Chinese direct investment will be worth as much as $200 billion by 2030.

However, overall foreign investment in Australian property has actually decreased this year. Non-Chinese investment in Australian property fell by $8.2 billion dollars. The increase in Chinese investment was not enough to offset that $8.2 billion drop.

A Problem of Supply?

If it isn’t Chinese investment fuelling the rising prices, then what is? ANZ Australia’s chief executive Philip Chronican has pointed to the supply of property as the key issue.

RBA Governor Glenn Stevens, who has himself noted that Chinese investment in Australian property is no cause for concern, emphasizes the role of foreign investment in increasing supply. Purchasing rules for foreign investors are different from those that apply to domestic investors, with foreign buyers encouraged to purchase newly built property. Foreign investment thus stimulates the building sector without necessarily driving up the price of existing residential stock.

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