Chinese investors are chomping at the bit to spend $500 billion abroad over the next five years, and Australian real estate is near the top of their wish list.
But no one is sure how long Chinese interest in new apartments and high-end houses in Sydney and Melbourne will last.
It’s a contentious issue around Australian kitchens and boardrooms, especially if you’re one of the many people approaching retirement who’ve secured an investment property and loaded up on debt.
If you believe prominent banking analysts and the Chinese leadership, Australian property prices have got a long way to run, underpinned by supply issues and foreign investment.
But if China suffers a big shock and large amounts of capital leave our shores, what will happen to real estate prices in the nation’s largest cities?
Over the past year Sydney house prices have risen almost 15 per cent while Melbourne prices are 11 per cent higher.
National average house prices are up 10 per cent and debt owed by households is rising by more than eight per cent annually.
Chinese investors, the largest group of overseas property buyers, are well known for aggressively bidding up prices at auctions, raising the ire of locals who have missed out.
The link between Chinese investors and higher prices has also been made in analysis by Credit Suisse, which found rich Chinese investors are buying almost one fifth of new housing built in Sydney as part of a $5 billion annual outlay on Australian real estate.
Credit Suisse forecasts Chinese investors will purchase another $44 billion worth of property over the next seven years after spending $24 billion over the past seven years.
“Chinese buying power will increase as the economy develops,” the report said.
Chinese leaders continue to talk up the country’s eagerness to invest in Australian real estate, as well as the established local investment channels of resources and energy.
China’s ambassador to Australia Ma Zaoxu recently told a business lunch in Perth that China Australia two-way investment had been expanding, with non-financial investment in Australia, including real estate, totalling $US3.94 billion ($A4.35 billion) in 2013, an increase of 82 per cent.
“There’s great potential for an increase in Chinese investment in this country,” Mr Ma said.
“Still much more is to be tapped.”
He said Australia was one of China’s major investment destinations.
Last year China’s nonfinancial direct investment in Australia was around US$17 billion, while outbound foreign investment is expected to be US$500 billion in the next five years, he said.
Mr Ma said Chinese investment in Australia included real estate as well as energy and resource development, agriculture and manufacturing and financial services and IT.
In spite of the bullish investment forecasts, Chinese nationals only account for a small amount of local property owners.
It comes as a Federal Parliamentary Committee is examining the laws governing foreign investment and whether investment is driving up prices.