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Foreign buyers are returning to the Australian property market in a big way.
Juwai IQI co-founder and group managing director, Daniel Ho, has made the statement, “Chinese buyers are back.”
Not only that, but he expects “more will come in the second half of the year than in the first.”
Juwai IQI is expecting Chinese investment in Australian real estate to climb “at least 30 per cent in 2023 compared to 2022.”
According to Mr Ho, it’s because Chinese buyers are going through the same phenomenon seen in Australia and the United States: “Exiting the pandemic with more money in the bank.”
“Chinese households added more than US$2.6 trillion to their bank balances in 2022. Their bank deposits now exceed US$18 trillion. That’s larger than the country’s entire gross domestic product and is 11 per cent higher than would be expected from pre-pandemic trends,” he outlined.
Bolstering their foreign buying habits is the fact that “neither the Chinese housing market nor the stock market is attractive enough right now for Chinese to invest their savings,” Mr Ho stated.
“The confidence many Chinese had in their own economy and housing market declined during the pandemic, so overseas markets like Australia look better by comparison.”
The co-founder continued: “In China, they talk of ‘revenge spending’ as people who have been under lockdown splurge on all the things they couldn’t buy during the lockdowns. Real estate in Australia might be the ultimate revenge purchase.”
Pointing to the stats of economists, he acknowledged that Chinese buyers moved about US$150 billion overseas annually pre-pandemic, but Mr Ho expects that will probably be higher in 2023.
That’s all due to catch-up activity after three years of lockdowns.
And, that’s backed by Juwai IQI’s own data, which found Australia had topped a list of Chinese buyers’ favourite countries, as ranked by the number of buyer enquiries received by the international real estate group.
Domestically, Mr Ho said that the group’s buyer enquiries show that “about one-third of Chinese buyer enquiries go to Melbourne, while about one-quarter go to Sydney, and one-fifth each to Perth and Brisbane.”
Mr Ho’s insights are supported by the release of the NAB Residential Property Index last week, which showed that the Australian residential property market is “still relatively weak”, thanks to the continuing slide of house prices across January and February.
According to the report, first home buyers have “pulled back heavily” across new housing markets, with the share of total sales dropping to a near six-year low of 35.7 per cent of total purchases. First home buying owner-occupiers are most to blame for this drop, with these purchasers representing just 23.7 per cent of buyers.
But while domestic buyers are showing sensitivity to current market conditions, the same cannot be said for foreign buyers, who have seen bolstered activity across new and established property markets.
NAB noted that the overall market share of foreign buyers in new property markets lifted to 7.9 per cent in quarter one, which was underpinned by a steep increase in NSW to 16.2 per cent.
According to the big four bank, that’s the highest read seen since the first quarter of 2015.
Western Australia and Queensland also benefited from the foreign buyer influx, reporting 7.9 per cent and 7.5 per cent market shares, respectively.
The above three markets buffered the 4.0 per cent market share of foreign buyers in Victoria, which was a two-year low for foreign interest in the state.
When it came to established property, the share of foreign buyers lifted to 3.8 per cent in the first quarter, with activity increasing across all states. NAB reported it as highest in Queensland (4.6 per cent), followed by Victoria (4.2 per cent).
NSW reported a 3.7 per cent share of foreign buyer activity, while Western Australia reported the lowest proportion at 2.9 per cent.
Many agents are already taking note, with the report stating: “The number of property professionals expecting foreign buyers to increase their market share in new property markets significantly outweighed those expecting their market share to fall.”
It’s a sentiment that carries through to the established market, with more property professionals expecting foreign buyers to increase their market share over the next 12 months, NAB reported.
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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