Chinese $60bn Prediction

Market Insights
8 years ago
2 minutes

Credit Suisse have revealed in their latest report that investors based out of China could possibly spend $60 billion into Australian real estate over the next six years - with a serious emphasis on new housing.

In a report, compiled by Credit Suisse Australia analysts and strategist Hasan Tevfik, the true implication of Chinese investment was revealed. In the report, it is said that the next six years, up until around 2020, will see a dramatic and consistent investment increase from China. This figure, $60bn, is double that what has been invested in the past six years.

This comes on the back off the Victorian Government’s surprise taxes for foreign investors, as well as the Federal Government’s crack down on foreign investors bending and breaking the rules.

China is now Australia’s leading foreign investor nation, as they had a whopping $12.4bn approved splurge on Australian real estate over the past financial year. This is a 60% increase on Chinese spending in Australia, and they occupy 15% of the national housing supply to date.

“Purchases are concentrated in Sydney and Melbourne where Chinese demand is the equivalent of 23 per cent and 20 per cent of new supply, respectively,” Mr Tevfik said.

“While new foreign investment proposals may make Australian real estate less attractive for Chinese buyers, we believe the potential erosion of demand will be marginal.

“After all, Australia is on the doorstep of the greatest wealth creation in three centuries. Despite moderating growth, we expect more Chinese wealth to be invested abroad.”

It is believed that Australian housing-related stocks, which includes developers, building material companies and property websites will experience massive booms.

“Without a structural increase in supply to match the structural increase in Chinese demand, there will unfortunately be strong property price inflation for many years to come.”

The latest Victorian foreign investment tax changes are believed to make Sydney prices sky-rocket.

“We imagine the potential increase in fees to buy a Melbourne property would drive the marginal buyer to other Australian cities like Sydney where charges are lower…a tax in Victoria could make Sydney house prices even more expensive,” Mr Tevfik concluded.