Why Chinese investors come to Australia: it’s luxurycompared to home
Beijing: Jone Wang is listening intently as property spruikers sell the merits of a brand new townhouse in Melbourne’s Thornbury over an off-the-plan apartment in Sydney’s Epping.
Ms Wang, a petite woman in her early-40s, is just one among a thronging Chinese crowd at an international property expo being held at one of the main exhibition centres in central Beijing, where Australian and other overseas property developers come in increasing numbers to hawk their wares.
Competition is intensifying as developers double-down on their marketing push into China, hoping to capitalise on the trend of mainland buyers taking flight over concerns of an acutely slowing domestic economy, accentuated by a volatile stockmarket and a real estate price bubble.
A two-bedroom apartment in poor repair used as a makeshift worker’s dormitory has an asking price of $650,000 and up. Photo: Supplied
“I don’t know much about Australian property,” Ms Wang told Fairfax Media, clutching a fistful of showbags and brochures. “But property prices in China are far too high. And you invest millions of yuan in one property but only get a few thousand in rental income.”
Ms Wang said she has been on the lookout for a suitable investment for two years, having sold one of her properties in her native Jiangsu when she moved to Beijing with her school-aged son. The former state-owned oil company employee says Chinese real estate is over-priced and is convinced an overseas investment – she is deciding between Australia and the United States – represents best value.
China’s larger cities have among the most expensive residential real estate in the world, according to house price to wage ratios compiled by the International Monetary Fund in 2013. In Beijing, the median house price is more than 22 times the average annual wage.
Six construction site supervisors share this modest three-bedroom flat near central Beijing, on sale for about $700,000. Photo: Supplied
A quick glance around the typical dwellings for sale in major cities like Beijing or Shanghai make it obvious why Chinese buyers, in stark contrast to locals, consider both Sydney and Melbourne real estate a bargain. And it is evident too in the widening gap between rich and poor, where lowly-paid migrant workers struggle to find affordable housing in the bigger cities.
Homebuyers armed with a $700,000 budget in central Beijing can at best afford a modest two-bedroom apartment, in a densely-populated, ageing residential compound built in the 1980s.
Among the apartments at this price point shown to Fairfax Media by local real estate agents for this story include a 65-square metre three-bedroom apartment with no living room and a tiny kitchenette, shared by six construction site supervisors.
Another was a similarly-sized, well-worn two-bedroom apartment used by a restaurant as a make-shift workers’ dormitory, with 14 waiters and kitchen-hands sleeping on austere steel bunk-beds.
Newer luxury apartments can easily go for triple or more the price per square metre.
China’s high property prices had been stoked to red-hot levels by frenzied speculation from buyers and property developers eager to cash in. With little regard for economic fundamentals or rental returns, property speculators snapped up apartments off-the-plan with an inherent confidence that prices would continue to rocket.
But government measures to take the heat out of the market have seen confidence in the market deflate rapidly, with overcapacity in smaller second and third-tier cities particularly pronounced.
And with the Chinese economy now growing at its slowest rate in more than a quarter of a century the central government has cut interest rates six times in the past year and brought forward infrastructure spending to bolster growth.
Juwai, the largest international property website for Chinese buyers, says if China continues to loosen restrictions on the ability of privately-held capital to be moved offshore, it could deliver a further $US2.3 trillion to international residential real estate markets.
“Most wealthy Chinese already own several properties in China and want to diversify some of their investment internationally,” co-chief executive Andrew Taylor said.
“Middle-class Chinese are just waking up to the opportunities of overseas property investment. You could say it’s a developing trend to buy property in another country.”
Like many Chinese investors, the lack of promise in China’s property markets saw Ms Wang turn to speculating in shares instead. The flood of investors sucked in by the sharemarket’s remarkable bull run fuelled a spectacular bubble and bust in the space of a year.
Ms Wang said she was lucky to get out before the worst of the stockmarket crash, but said it only reinforced her opinion that there were no truly safe investments at home.
“Now, China’s domestic economy is not good and I’m concerned my assets here will depreciate,” she said, adding that her main priority was saving enough of a nest egg to help her son study university overseas.