Agents and regulations driving offshore Chinese property investment; study

A new study from the University of Western Sydney has found foreign investment in Australian real estate is driven by financial, immigration and real estate agents, rather than investors themselves.

To understand the drivers of overseas investment in Australia, Dr Dallas Rogers and Dr Chyi Lin Lee from the UWS Urban Research Centre investigated Chinese investment in real estate by studying sales data and interviewing international real estate agents.

Dr Rogers says global Chinese offshore investment in Australian real estate increased around 400% between 2006 and 2014, and there's a perception investors are distorting the market and pricing locals out of the housing market.

"While there's no doubt that Chinese investment in Australian real estate has markedly increased, this has been offset to some degree by the retreat of offshore investors from America and Europe," he says.

"While there could be long term effects, it's simply is not the case that new Chinese investors are crowing the market and forcing out locals."

The study team visited international real-estate roadshows to examine the regulatory and business framework facilitating new offshore purchases, and gain an insight into how the global real estate industry and government policy is driving new purchases.

Dr Rogers says real estate roadshows are complemented by sophisticated trans-national websites and local 'fixers' who aggressively promote residences for sale across the world.

"It's not a trend isolated to Australia- local agents are competing for a share of the new market for offshore transactions," says Dr Rogers.

"Australian real estate agents are travelling to China to market their properties directly to the foreign investors, and Chinese and Australian agents are offering free group tours for potential investors to travel down under."

"In addition, companies employ Australian-Chinese agents to bridge cultural and linguistic gaps and to communicate information about Australia's visa, foreign investment, real estate and education systems."

"So it's clear the global real estate industry is working hard to bring foreign investors to Australia, and have a central role in many of the recent transactions."

Dr Rogers says foreign investment is a relatively small share of total dwelling turnover, and removing it from Australia's housing system may not address the trend for house price increases or inward urban migration over time.

"Rather than pointing the finger at foreign investors, there are many supply- and demand-side factors behind the lack of housing affordability in cities such as Sydney and Melbourne," he says.

"Population growth and 'in-migration' into capital cities is fuelling demand for housing, and low interest rates are putting significant upward pressure on prices," he says.

"In addition, land-use planning as a form of intervention into the private housing market to increase housing supply has failed, and private household wealth and taxation policy continues to skew the market."

"Rather than blaming foreign investors for housing affordability problems we should discussing how to use foreign capital to provide affordable housing through foreign developer and investor taxation."

Ends

19 Thursday 2016

Mark Smith, Senior Media Officer