Fear of Chinese buyers is now a part of agents' scripts

There has been an underlying strength in the Melbourne market since October 2012, but right now it looks like it has gone up a notch again.

Over the last year or so we have talked about the staircase market in the inner Melbourne auction scene; meaning for a month or so it seems to go hot, go incredibly strong and then it flattens out for a while, before giving another burst again. There is no doubt that in late August 2014 we are in another rise.

And at James Buyer Advocates we think it has little to do with the lack of stock (in fact we don’t even think there is a serious lack of good stock right now, remember the stock drought of 2012, today is nothing like 2012). No, we think the current market is all about the strong waves of demand on the right homes.

As we said last week, it’s not so much about the bidders who bought, but the ones who didn’t. What will they do next week or next month when they return to the fray on the next property they choose to compete on?

Chinese Nationals – Scripts, Dialogues and Fear

Where is this strong demand coming from? In our opinion it’s coming right across the board and it is the Chinese nationals who are squeezing the hardest.

But it is not just their actual bidding that is creating the near frenzied bidding response that we are seeing out there right now.

Since 2007 and the FIRB law changes, Chinese nationals bidding have been the single most dominant reason why the Melbourne market has done what it has done (basically outperformed almost everywhere else in the world) and right now in 2014 their influence as a bidding group remains unabated.

However even when no Chinese nationals are bidding, it’s the fear of Chinese nationals bidding that is also pushing prices up. Ask any agent on an inner east home coming to auction and they will tell you we have some “Chinese interest” – it is something firmly implanted in many agents’ “buyer scripts”.

In other words, buyers not only bid as they do against Chinese national bidders but also on the fear that Chinese nationals may bid. The fear issue is also pronounced in expressions of interest and private sales.

Unless the overall bidding of Chinese nationals is affected by something, we feel the market will continue to be strong for some time.

My last 10 purchases I have been directly involved in (Kew, Camberwell, East Melbourne, Elwood, Camberwell, Glen Iris, Camberwell, Kew, Camberwell and Kew) saw Chinese nationals as the direct underbidder on five, used in the selling agents negotiating scripts twice and no mention of Chinese bidders by agents on the other three.

Please note we act for a number of Chinese nationals and they also are affected by the bidding or fear the bidding of other Chinese nationals.