How to understand Chinese property buyers
Amanda Sun bought three houses worth a total of $3 million on the Gold Coast after visiting just once as a tourist.
Sun is Chinese, 33 years old and owns a small trading firm, according to a recent news story. She is typical of the Chinese buyers who have rescued many Australian developers, agents and vendors from deeper price cuts and longer selling times in recent years.
Less than 12 months ago, the Chinese government got a shock when the results of a comprehensive survey of high-net-worth Chinese like Sun were released. The two organizations behind the survey are very respectable, Bain & Co and China Merchants’ Bank, so the results can’t be written off as a fluke.
The survey revealed what many Australian agents had already been feeling: rich Chinese, for various reasons, want to get out of China, and they believe buying property in Australia and other countries enables their escape.
Not just a few rich Chinese want out.
A full 57% of rich Chinese have contemplated emigration. About 20% have actually completed immigration procedures in countries like Australia or expect to do so soon.
These percentages account for huge numbers of individuals, because China has the fourth-largest number of high-net-worth individuals in the world. Each year the cohort grows by nearly 10%.
Many of those rich Chinese emigrants are coming to Australia. China sent more immigrants to Australia in 2010 than any other country, including the UK and New Zealand.
Even as they sink roots in Australia, rich Chinese like Sun are also keeping a presence in China. For example, published research shows that about 80% plan to keep their Chinese passports.
It is common for the wife and child to live abroad, while the husband spends most of his time in China. Chinese émigrés might still run businesses in China.
They are usually moving abroad for their children. They believe that Western schools and universities are better than their Chinese counterparts, and that living overseas gives their children an advantage.
Foreign residency could also be useful in case China goes through policy shifts, like massive new wealth taxes, or social unrest. China is a rapidly changing country. Riots, strikes and protests recently doubled over the last five years to 180,000.
Emigration and educating children are just two of the reasons wealthy Chinese are buying property in Australia. The third is for investment.
As Sun puts it, Australia’s “legal system is better”. She plans to migrate to Australia to live in one of her new homes. She will find renters for the other two.
Australian property is an attractive investment in its own right, with credible economists predicting prices will be 55% higher in 10 years.
It also represents a diversification of risk. Instead of only investing in property in China, they put some of their money overseas so that they don’t lose everything if the Chinese property market goes down.
Buyers like Sun have made a real impact on the Australian property market. As one agent told the Sydney Morning Herald about Chinese buyers, “They're the only ones that have got the big dollars at the moment”.
The Financial Times has reported that Chinese buyers account for 20% of all purchases in Sydney. This may be an overestimate, but it reflects the trend. They tend to seek out property that has water views or is close to the ocean or major universities and CBDs.
Many developers depend on Chinese buyers for their off-the-plan unit sales. Chinese parents often buy Australian apartments for their children to live in while studying.
At the Stamford Residences, a 30-level tower at The Rocks in Sydney, one buyer recently bought a $2 million apartment to serve as this sort of student housing. In total, mainland Chinese buyers snapped up about six of the building’s 122 apartments.
In Melbourne, developer Morry Schwartz of PanUrban says, "Chinese buyers, both local and from Asia, account for about 60% of enquiries and purchases at Pan Urban's developments. That's up substantially from a few years ago.”
Meriton general manager Peter Spira told the Australian Financial Review that Chinese buyers enabled the company to keep up production rates in Melbourne and Sydney through the global financial crisis.
"We build between 1,300 to 1,500 new apartments each year in NSW and south-east Queensland," Spira says.
Schwartz reckons, "You are not doing a good job at selling real estate in Australia today if you're not marketing to the Chinese buyer”.
Chinese buyers also make their mark on the higher end of the market. Just this month, a luxury penthouse at Lumiere Residences in the Sydney CBD was reported sold for $8.1 million to an Asian, possibly Chinese, investor.
But, while new developments and luxury properties grab the headlines, the overwhelming interest I see is from Chinese buyers enquiring about affordable second-hand property in good locations.
Andrew Taylor is the founder and CEO of sales and marketing of Juwai.com, the number-one Chinese real estate portal for property in Australia and around the world.