China-based estate agencies selling Australian properties through inflated two-tiered pricing schemes

China-based estate agencies selling Australian properties through inflated two-tiered pricing schemes
China-based estate agencies selling Australian properties through inflated two-tiered pricing schemes

China-based estate agencies are selling Australian properties through a two-tiered pricing structure with inflated prices to China-based buyers, according to Michael Yang, the chief of GiFang.com, the largest Chinese language property site in Australia.

"Some agents sell at more inflated prices to China-based buyers," he noted.

"When developers promote house and land packages to buyers in China for areas such as Point Cook, Sanctuary Lakes and Tarneit, the land component of the package can sometimes have a higher price in China.

"They are “exclusive lots” for Chinese buyers that are only promoted in China," he noted in a blog published on the China Spectator website.

"It is believed that one in 10 China-based agents are involved in selling Australian properties according to a two-tiered pricing structure. 

"The misconduct of Chinese agents also contributes to the perception that Chinese buyers are willing to pay for above the market price."

"This is perhaps the biggest misconception of all," he added.

He said stories about Chinese buyers turning up at auctions with suitcases packed with cash and making an on-the-spot decision to buy the property without a proper inspection were not likely to be accurate.

"Very few of these stories are true or are at least exaggerated.

"In our survey conducted in China, 63% of buyers said they would ask a friend or relative based in Australia to inspect the property for them, and the remaining 37% believed it was a must for them to inspect the property personally before making the final decision."

Even if the property is an off-the-plan apartment, they will still travel to Australia to get a feel for the location and to conduct personal research.

He also refuted then widely held belief that Chinese buyers pay for their real estate purchases in Australia in cash and there is little need for them to borrow.

"This could not be further from the truth."

He said some 97% of Chinese buyers in Australia rely on mortgages, according to the survey of 283 buyers.

"The big four banks have all established offices in China in order to assist China-based buyers to purchase Australian properties using home loans.

"These banks are responsible for making 85% of all home loans of Chinese property buyers in Australia.

"Chinese buyers generally accept the idea of investing with "OPM" (other people's money) and love the fact that a minimal amount is required to own or control real estate in Australia."

He suggested Westpac was responsible for 70% of all home loans from China, according to the survey results as well as a banking source.

Michael Yang added the situation was different in China where property buyers are forced to use more cash to buy properties.

"For example, Chinese banks will only lend up to 70% of the value of the home to borrowers for their first purchase and 30% for their second home.

"Third purchases are usually not allowed."

The fourth misconception addressed in the blog was that Chinese buyers do not seek out rental yields by merely land banking.

"As Chinese investors become increasingly educated about the Australian market, rental yield becomes more and more important.

"Gifang's surveys in China show that more than 90% consider rental yield an important aspect to their property purchase, with the acceptable rental yield at 5%.

He noted more than 72% of investors consider capital growth as more important than rental yield but all prefer to have a balance.

He did add that some Chinese investors would rather leave their residential property vacant for most of the year until they visit Australia and use their properties for personal enjoyment. 

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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Foreign Buyers China

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