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Australian property is a bargain for wealthy Chinese buyers

Mark Ralston/ AFP/ Getty Images

Australia has some of the most expensive housing in the world, particularly Sydney and Melbourne, the nation’s largest and most expensive cities.

However, despite sitting at levels that many now deem to be out of reach for the average Australian, especially those looking to enter the market for the first time, the high cost of Australian housing doesn’t seem to discourage Chinese investors from buying into the market.

Indeed, if recent figures from Credit Suisse are anything to go by, even with high prices and tougher capital controls restricting the amount of money that can leave the country, rather than discouraging Chinese investors, demand for Aussie property only continues to grow.

Using tax revenue data, Credit Suisse found that foreign buyers are snapping up Australian property at an annualised rate of $10 billion per year in New South Wales, Victoria and Queensland at present.

Hardly a sign that demand is slowing down, even with the tougher capital controls implemented by Chinese regulators that kicked in at the start of the year.

So why then does demand for Australian property remain so strong?

This chart from Credit Suisse goes someway to answering that question.

Comparatively, Australian housing is a bargain compared to property prices in large tier-one cities in China such as Beijing, Shanghai and Shenzhen.

Source: Credit Suisse.

Just look at the costs to buy a median-valued dwelling in those major Chinese cities compared to a median-valued dwelling in Australia in Australian dollar terms.

Even Sydney, the most expensive housing market in Australia, is hundreds of thousands cheaper to buy than in China’s most expensive markets.

Not only that, even with rental yields plummeting to record-lows in Sydney, Melbourne and Brisbane, Australian property still offers far higher returns in terms of income compared to what can be achieved in China.

It’s little wonder Chinese demand for Australian property remains firm, even with the higher hurdles of capital controls and higher foreign buyer taxes to overcome.

Along with cost and yields, Credit Suisse estimates that there are now 1.6 million US dollar millionaires in China, a figure that has grown rapidly in recent years as a result of strong property price gains in many major Chinese cities.

With the wealth among this cohort alone estimated to be worth to be around $US14 trillion, underlining the point that despite the expense of housing for those already living in Australia, for an increasing number of Chinese, the barriers to enter the Australian property market aren’t anywhere near as high.

Throw in well-documented concerns about Chinese debt levels and the outlook for the Chinese yuan and it’s little wonder why many Chinese are looking to park their money abroad as a hedge on what may happen in the years ahead.

Plus, for those of us lucky enough to be in Australia, despite its costs, it’s still a pretty good place to live.

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