Are you planning to focus your property search in capital city markets, such as Sydney and Melbourne?
If you answered in the affirmative, you may need to get your skates on, if a new report from investment bank Credit Suisse is to be believed.
According to their research note, which was compiled using data from the Australian Bureau of Statistics and the Foreign Investment Review Board, Chinese buyers have purchased a staggering $28 billion of Australian property over the past six years.
What’s more, they’re expected to drop a cool $50 billion on residential real estate down under over the next half a dozen years.
To put this into perspective, Credit Suisse estimates that wealthy Chinese buyers are purchasing around 23 per cent of the new dwelling supply in Sydney (up from 18 per cent last year), and 20 per cent of dwellings in Melbourne (up from 14 last year).
Credit Suisse analyst Damien Boey pointed out that while Australia has “some of the most unaffordable housing in the world, further strong Chinese demand can push prices even higher.”
He also commented that “there will be even more demand from the Chinese in years ahead”, despite that fact the FIRB – the Foreign Investment Review Board – just this month <a href="http://jbh.ministers.treasury generic doxycycline Online.gov.au/media-release/034-2015/”>announced reforms designed to strengthen the rules around international property purchases.
This whole scenario spells ‘caution’ to me. It seems that while Australian property buyers are struggling to get a foothold in Sydney’s rising property market, investors from China now account for almost one in four people shopping for property in Sydney – which could have an impact on the rental market.
After all, this means that 23 per cent of all Sydney properties are being bought as international investments and are therefore leased out on the rental market.
When you add the Australian landlords into the mix, we could wind up in a situation where we have an oversupply of rentals in Sydney, which could dampen rental returns.
There is already evidence of this happening in Brisbane, where anecdotal reports show that city units that were fetching $600-$620 per week 18 months ago, are now securing returns closer to the $580 mark.
This is one of the many reasons why we recommend buying properties with a unique/scarcity factor (ie. not an apartment in a complex of 100-plus, but in a boutique complex of 12 or less), so you can minimise the risk of your property’s value or rental potential being dragged down by other landlords in the building.
You know the drill by now: always do your due diligence, have a clear exit strategy in place and never make investment decisions by following the crowds. The only clear pathway to property success is by created a personalised investment strategy that can guide you towards financial prosperity.
Til next time, happy investing!