New research has cast doubt on claims that foreign investment is pushing up Australian house prices, indicating offshore Chinese purchases totalled just 2 per cent of all transactions in 2014.
“It’s so low that it would be hard to argue that this is driving the affordability crisis in Australian real estate,” said the author of the research, University of Sydney professor Hans Hendrischke.
Dr Hendrischke compared the value of all residential property sales against Foreign Investment Review Board (FIRB) statistics, to calculate the impact of Chinese buyers – Australia’s largest source of foreign investment – on local housing markets.
Hans Hendrischke , Professor of Chinese Business and Management at the University of Sydney.Photo: Michele Mssop
Using data from the Australian Bureau of Statistics and CoreLogic RP Data, he estimated that $270 billion of residential real estate sold nationally in 2014.
Compared to FIRB approvals, which covers both new and established housing, he estimated Chinese purchases totalled “around the 2 per cent mark”.
There’s now substantial evidence showing the housing affordability problem is largely an historical home-grown problem.Dallas Rogers, WSU
Yet he argued even this figure was “overstated” as the figures were approvals and not actual purchases.
“Don’t blame the Chinese,” was Dr Hendrischke’s conclusion after presenting his findings at the Festival of Urbanism at the University of Sydney on Wednesday.
The research did not take into account the potential impact of illegal purchases by foreigners, which the Federal Government is presently investigating.
Anti-foreign buyer sentiment has been fuelled by strong house price growth, particularly in Sydney and Melbourne.
On Saturday anti-foreign buyer group Party for Freedom Australia took topicketing auctions on Sydney’s lower north shore.
Leader of the group Nick Folkes said: “Most of these people at auctions look like they just came off the plane looking to buy a property”.
Western Sydney University urban studies lecturer Dallas Rogers said Australia’s housing affordability woes were the fault of domestic situations and little to do with overseas buyers.
Dr Rogers said Australian citizens “of Asian appearance” were attending auctions and “being called foreign investors and racially vilified in Australia”.
He warned Australia’s “long standing cultural narrative of ‘Asian Invasion'” had been colouring the debate.
“There’s now substantial evidence showing the housing affordability problem is largely an historical home-grown problem,” Dr Rogers said.
Given affordability was a concern before the latest surge in Chinese investment, he argued the focus should be Australia’s taxation policies, supply and population growth.
“If we turned off foreign investment from China… it would not address Australia’s housing affordability problem,” Dr Rogers said.
In some locations, however, Chinese buyers are over-represented in terms of sales.
Sha Liu from the University of Sydney, currently writing a PhD about Chinese buyers and global real estate markets, said the percentage of Chinese buyers in certain developments can be “up to 90 per cent”.
This extreme is usually seen when the developer themselves is Chinese and the project is within a Chinese ethnic community area, such as Chatswood or Chinatown.
When a project is built by a Chinese developer, often up to 80 per cent of purchases can be from offshore buyers, she said. When it’s from a local developer this proportion was found to be much lower – up to 30 per cent.
Yet even this purchasing activity could be set for a slow down as Chinese buyers’ ability to borrow from Australian banks is eroded.
In April, Westpac tightened lending to foreign purchasers, telling mortgage brokers that applicants needed an Australian address.
“In the near future more banks in Australia will impose similar restrictions on foreign loans,” Ms Liu said
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