Last week, the Chinese Investment Corporation concluded a $2.5 billion deal to purchase nine premium office buildings across Australia, the largest single direct real estate sale ever in Australia. This move cemented China as the largest overseas investor in Australian commercial property, replacing the United States by a significant margin. As China continues to become an increasingly dominant figure on economic growth, many have begun to speculate how Chinese investors are influencing the overall health of the Australian property market.
Concerns Regarding Foreign Investors
Some economists worry that the sudden influx of foreign investors, most notably wealthy Chinese investors, will have a negative impact on the Australian real estate market. While it is generally agreed that foreign investments into industrial sectors such as mining and manufacturing would be beneficial to the Australian economy, some economists stress that Chinese investments into residential housing will be good only for the construction industry. The common worry is that as wealthy Chinese immigrants move into Australia, they will be able to buy homes and property in the most desirable areas, leaving the middle class and first-time home buyers unable to upgrade to the homes they want due to skyrocketing real estate prices at the higher end of the market.
Government Inquiry Challenges These Assumptions
However, a government inquiry performed last year disagrees with these statements, particularly with the cause of rising prices for homebuyers. According to the inquiry, property values tend to rise due to a lack of supply, and that foreign investment was considered by industry experts as vital to increasing that supply. The reality of the situation, according to the inquiry, was that foreign investment help keep prices lower by having more properties built increasing the available supply.
Ultimately, it is difficult to discern what the overall impact of China’s diverse investments in Australian property will be, but for the time being, it appears to be keeping the market healthy and competitive. Personally I believe that we are far better off with their investment than we are without it.