John McGrath: Chinese investors are buying less real estate in Sydney

Mark Metcalfe/Getty Images

Listed real estate agent McGrath has noticed a significant slow down in interest from Chinese buyers, and the company’s shared are being hammered as a result.

“Market conditions have become more challenging in the short term including a slowdown in Chinese buyer activity,” said CEO John McGrath, announcing December half results, the first since floating.

A short time ago, the company’s shares were down more than 17% to $1.40.

McGrath’s second half outlook and near-term performance is being affected by substantially reduced number of Chinese buyers in Sydney pre-Christmas.

Activity by Chinese buyers, taking advantage of a falling Australian dollar and a safe investing environment, are said to be a force in the new apartment market, particularly in Sydney and Melbourne, where supply is increasing.

The company reported a 33% rise in revenue to $54.3 million for the six months, but a 82% drop in profit to $0.4 million.

However, the company says it’s still on track to deliver a full year profit of $18.2 million, as per prospectus.

Much has been written about the slowdown in the property market in Sydney and Melbourne. However, recent auction clearance rates across the nation’s capital cities have topped 70%, indicating the run higher may not be over.

McGrath says the strength of the company’s business model can clearly be seen in the growth figures over the first half of this financial year.

Agent numbers were up 59 to 624 and the office network grew by 11 to 78.

“The long term fundamentals of the real estate industry remain attractive, underpinned by historically low interest rates, population growth, and the asset class generally,” says McGrath.

However, he says other challenging market conditions include increased stock market volatility and the impact of regulatory changes limiting finance for investor loans. Possible changes to negative gearing are also concerning.

The company intends to pay a final year dividend of about 4.5 cents per share.

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