Blaming foreign investors for price boom is ‘urban legend’

Blaming foreign investors for price boom is ‘urban legend’

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13 August 2015 by Nick Bendel 0 comments

Chinese buyers greatly increased their activity in specific markets in 2013 and 2014 but their overall influence is exaggerated, research has found.

Valuation firm Propell said foreign investors have been an “easy target” for those looking to explain strong price growth in Sydney and Melbourne.

“Like any urban legend it has become ingrained, but it is far from the truth,” Propell said in a report on foreign investment.

“It is not widely appreciated that while Chinese represent the largest group of foreign purchasers, the next largest groups come from the USA, Singapore and Canada. Between them, these three account for as many transactions as China.”

Propell said Chinese investors had the most impact in a small cluster of prime inner-city suburbs in Sydney and Melbourne where houses sell for more than $3 million.

In Sydney, house buyers of Chinese origin have a preference for Ashfield, Burwood, Chatswood, Epping, Lane Cove, Mosman, Roseville and Ryde, according to the report.

They represented 20.2 per cent of purchases between $3 million and $5 million in those suburbs in 2012. That fell to 14.3 per cent in 2013 and then rose to 24.7 per cent in 2014.

In Melbourne, house buyers of Chinese origin have a preference for Balwyn, Glen Waverley, Mount Waverley, Camberwell, Hawthorn, Hawthorn East, Kew and Toorak.

Their share of purchases between $3 million and $5 million was 26.3 per cent in 2012, 29.7 per cent in 2013 and 41.1 per cent in 2014.

According to Foreign Investment Review Board statistics for 2014, foreign investor approvals represented 7.5 per cent of capital city sales. Their median purchase price was $900,000, compared to an overall median of $480,000.

Meanwhile, City Index senior market analyst Chris Tedder said the Chinese government has contributed to the increase in Chinese investment in Australian real estate.

“It all began when policymakers in Beijing started imposing restrictions on China’s property market to prevent a bubble forming in prices, forcing investors offshore,” he said.

Mr Tedder said local property has been an attractive option for international investors due to the falling exchange rate and a perception that Australia is an undervalued market.

[LinkedIn: Are foreign buyers having any impact on your local market?]

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