Australia

Australians overwhelmingly support a crackdown on Chinese investors buying real estate amid growing concerns over housing affordability, a new survey has found.

Eighty-three per cent of Australians believe the government “should restrict the amount of investment in residential real estate that is permitted from Chinese investors”, according to the poll published last week by the University of Technology Sydney’s Australia-China Relations Institute.

That was the highest number in the four years the UTS:ACRI survey has been running.

"Chinese investment in Australian residential real estate continues to generate concern,” the authors wrote in the report, The Australia-China relationship: What do Australians think?.

The poll asked a representative sample of 2015 Australian adults a range of questions on issues ranging from national security — including foreign interference and the conflict over Taiwan — to tourism, trade and investment.

Only 28 per cent of respondents agreed that “Chinese investment in Australian residential real estate brings a lot of benefits for Australians” such as housing construction, new dwellings and jobs.

“Agreement with this statement has incrementally decreased over the last four years,” the report said.

A “clear majority” of 80 per cent of Australians agreed with the statement that “foreign buyers from China drive up Australian housing prices”, a seven-point increase from 73 per cent in 2023, and almost back to the 82 per cent high recorded in 2021.

Just under three quarters, or 74 per cent, said Chinese investors “have negatively affected the rental market for residential real estate in Australia”, also a four-year high and a six-point increase from 68 per cent in 2023.

More broadly, just under three quarters of respondents said Australia was “too economically reliant on China”, while just over half said foreign investment from China was “more detrimental than beneficial”.

David Ho, co-founder and group managing director of Asian property portal Juwai IQI, said the findings showed Australians were “stressed by the tight property market and believe foreign buyers are part of the problem”.

“They want foreign buyers to be restricted, regulated, and taxed, and that’s fine — because foreign buyers already in fact are heavily taxed, regulated, and restricted,” he said.

“The real solutions are much harder — limiting population growth, cutting zoning restrictions, building more transit networks to enable housing in new areas, and slashing construction costs.”

Mr Ho said foreign buyers from all countries contributed more than an estimated $200 million in stamp duties just in the first nine months of last year in NSW and Victoria.

“The federal government long ago restricted foreign buyers to only new property, meaning something off the plan or just built,” he said.

"State governments have imposed additional stamp duties and land taxes on foreign buyers that cost each person hundreds of thousands or millions of dollars per buyer. If you’re competing against a buyer at an auction, they’re almost certainly not a foreign buyer.”

Mr Ho added several studies including a parliamentary inquiry had looked at foreign buying “very closely” and found it “leads to a net gain in housing supply and [doesn’t] push up home prices, except in just a very few suburbs in each of the capital cities”.

“These off-the-plan foreign buyers are crucial for developers to get early sales because, without those sales, they can’t start construction,” he said.

“That’s why foreign buyers are restricted to new development properties. Because each foreign buyer facilitates the construction of four new dwellings by enabling the developer to go ahead with their project. If you remove foreign buyers from off-the-plan sales, it will probably mean prices and rents go up.”

Faced with similar concerns, the Canadian government last year announced a two-year ban on foreigners buying residential property, sparking calls for Australia to follow suit.

The role of Chinese investors in the Australian property market has long been a point of contention — foreigners without Australian citizenship or permanent residency can only purchase new homes, under the theory it that helps boost housing construction, but may purchase established dwellings subject to approval by the Foreign Investment Review Board (FIRB).

The FIRB’s latest quarterly figures showed, despite a significant drop, the Chinese remain by far the largest foreign buyers of Australian homes, with $700 million worth of investment proposals approved between July 1 and September 30, 2023.

The 523 residential dwellings approved — at an average value of $1.34 million — was down from 826 dwellings worth a combined $1.1 billion in the prior three months.

In the full 2022-23 financial year, Chinese investors purchased 2601 homes worth $3.4 billion, up from $2.4 billion comprising 2317 homes in 2021-22.

The FIRB’s figures for the October to December quarter are expected to be published soon. Industry sources have suggested the numbers are several weeks overdue, as they would typically have been released in early June.

China-focused real estate agents told The Australian last month that many mum-and-dad investors who purchased one or two-bedroom off-the-plan apartments were now desperate to offload their properties and bring the money back home to rescue struggling businesses.

The implosion of China’s real estate bubble, which has sparked a wider economic crisis and a frantic rescue mission by Beijing to use public financing to buy up unsold properties, had already seen billions of dollars worth of Australian apartment projects by giants like Greenland, Wanda, Country Garden and Poly abandoned in recent years.

Rising interest rates and tougher rules on foreign investors who buy Australian properties and leave them empty, announced by the federal government in December, have contributed to the rise in distressed Chinese sellers.

Plus Agency managing director Peter Li told The Australian that prior to Covid his Sydney-based agency kept “buying, buying, buying” for Chinese clients.

“We still service a lot of our Chinese clients,” he said.

“Now we help them with selling, selling, selling.”

But the same domestic economic woes causing pain for the middle-class have had the opposite effect at the top end of the market, as ultra-wealthy Chinese accelerating relocation plans rush to park their money in multimillion-dollar trophy homes in Australia’s most exclusive suburbs like Melbourne’s Toorak.

“They are coming in busloads,” Morrell and Koren director David Morrell told news.com.au in November.

The frustrated local advocate said 100 per cent of sales in the prior six months had been to Chinese buyers, some of whom were paying cash to secure luxury properties and pricing locals out of the market.

“We are seeing jumps of $2-3 million dollars on properties,” he said.

“We have a marketplace that is disproportionately being sold to Chinese buyers, relative to the rest of the population.”

He used the example of a recent property that was on the market for $9.2 million.

“There were five Chinese parties biding and it sold for $12 million,” he said.

“They have paid a $3 million dollar premium. It wasn’t just one of them there are now four wounded underbidders. What’s happening in Toorak is only a look at what is happening under the blankets, across the country.”

His comments came after Toorak buyer’s agent Alex Bragilevsky told The Australian Financial Review wealthy Chinese buyers were taking private jets to Melbourne to purchase mansions on the spot.

“I’ve facilitated $135 million of real estate deals [in Toorak] in the past six months,” he said. “All these buyers were Chinese.”

But Jeremy Fox, director of RT Edgar at Toorak, disagreed that it was necessarily a bad thing.

Ultimately, it flows onto the rest of the market, and has protected the housing market from a downturn,” he said.

“It is good for the real estate market when the top end is strong because the money flows down to all price ranges in Melbourne.”

Leith van Onselen, co-founder of MacroBusiness and chief economist at MB Fund and MB Super, said there had “certainly been many anecdotal reports of increased activity by Chinese buyers in Australian real estate” but “how this translates to FIRB numbers remains to be seen”.

Meanwhile, fresh figures show foreign demand for new properties also remains strong.

NAB’s quarterly Residential Property Survey found the market share of foreign buyers in new Australian housing markets fell slightly in the three months to March to 10 per cent, down from a six-and-a-half-year high of 11 per cent in the last three months of 2023.

This remained above the long-term survey average of 9.1 per cent.

“Despite the slip, there has still been a near five-fold rise in foreign buyer market share in new Australian home markets since hitting a low of just over 2 per cent during the Covid pandemic in mid-2021,” NAB said.

Mr van Onselen said the federal government should step in and ban temporary residents from purchasing established Australian homes.

“Implementing a ban on temporary residents would revert the rules back to what existed prior to the global financial crisis,” he said.

“That is, before the Rudd government carelessly opened up the established housing market to temporary residents in 2009. Australia must also implement the tranche two global anti-money laundering rules pertaining to real estate gatekeepers, including real estate agents, lawyers, and accountants.

"Australia has delayed the implementation of these global AML rules for around 15 years, which has made Australian housing a magnet for dirty foreign money and helped to inflate housing prices.”

It came as Prime Minister Anthony Albanese hosted China’s second-in-command, Premier Li Qiang, in Canberra on Monday for the annual leaders meeting, where he declared that the two countries will “co-operate where we can and disagree where we must”.

In a statement issued after arriving in Australia, Premier Li said China-Australia relations were “back on track” after a series of “twists and turns, generating tangible benefits to the people of both countries”.

“History has proven that seeking common ground while shelving differences and mutually beneficial co-operation are the valuable experience in growing China-Australia relations and must be upheld and carried forward,” he said.