Chinese buyers bought $8.7 billion in Australian residential property in 2013-14, or about 15% of new homes, and the number is growing fast, according to Credit Suisse estimates.
Most of the purchases are concentrated in Sydney, where Chinese buyers are snapping up the equivalent of 23% of new supply, and Melbourne 20%.
Credit Suisse expects $60 billion in purchases by Chinese buyers over the next six years, more than double the $28 billion over the last six.
This surge in housing investment is driving demand higher, in a record low interest rate environment, with prices rising in Sydney by 13.9% over the last 12 months and by 5.6% in Melbourne.
New home sales are at their highest level since early 2010 and the action is in apartments. Multi-unit sales rose 11.3% in March compared to a more modest 2.6% increase in detached houses, according to the Housing Industry Association.
“We think Chinese demand is having an influence on property prices in both cities,” Credit Suisse says in its note to clients. “Even though housing supply has increased over the last year or so, Chinese demand has risen by more.”
The federal government has new fees for foreigners wanting Australian property and has started to crack down on breaches, forcing the sale of a $39 million Sydney house because the Chinese national wasn’t a resident here as required to purchase an established property.
The rules include a basic $5,000 fee for any foreign investors buying a property under $1 million, rising to $10,000 depending on the price.
And the Victorian government is talking about another 3% stamp duty when the buyer is not a resident of Australia.
“While this is less than the charges for Chinese buyers in Hong Kong or Singapore it is considerably higher than other cities where the Chinese like to buy,” Credit Suisee says. “We wouldn’t be surprised if an additional tax in Victoria drives up house prices in Sydney.”
Investors wanting to benefit the Chinese investment trend, should be focus on Australian companies with more exposure to new homes, says Credit Suisse.
Those stocks include Stockland, Mirvac, Lend Lease, Boral, Adelaide Brighton, CSR, Dulux and BlueScope Steel.
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