A quarter of Chinese buyers leave properties vacant: UBS survey

A quarter of Chinese buyers leave properties vacant: UBS survey
A quarter of Chinese buyers leave properties vacant: UBS survey

Amid the Federal budget moves to introduce a vacancy tax, a survey has found that a quarter of Chinese buyers of residential property leave them empty.

The survey by investment bank UBS of mainland Chinese customers also showed that a further 45 percent rent out their investment properties and so are unlikely to be affected by higher local taxes on foreign buyers of residential property imposed by countries such as Australia.

The effect of higher charges depended on the motivation for buying, according to UBS's global head of real estate Kim Wright who oversaw the survey.

"If it's for permanent self use or temporary self use, presumably the stamp duty is an added cost, but if there's another reason why they buy – if they've got a kid at university or business abroad – then maybe it's not as material," she was cited as saying by The Australian Financial Review.

The respondents were mostly undeterred by China's tighter currency controls in their wish to buy residential property.

The survey of 3,300 people in March and April excluded high net worth individuals. 

The survey’s results comes amid evidence that mainland Chinese demand for Australian residential property is weakening.

Real estate agents have reported a sharp drop in Australian sales over the past six weeks as new property taxes take effect, while others say Beijing's tighter capital controls are also hurting demand, according to the AFR.

The six-monthly UBS Evidence Lab: China housing survey, the fifth by the investment bank, features Australia as just one of many destinations sought by Chinese buyers. Only 10 per cent of respondents said they owned property outside China and Hong Kong - higher than in previous surveys - with Singapore, Japan and Canada the preferred destinations. 

Sydney ranked fourth on the list, followed by London, New York, Melbourne and San Francisco.

The fresh appetite for foreign property from mainland China came at a time of renewed vigour that pushed domestic property sales in the largest Tier 1 and Tier 2 cities up 25 per cent year on year in January and February before easing to 15.7 per cent in mid-May.

"'Animal spirits' are increasingly behind the re-acceleration in Chinese housing demand," the survey says. 

"Expectations of higher prices were behind 30 per cent of all purchases in the last 12 months and the reason for two-thirds of buyers purchasing earlier than they planned. The proportion of consumers expecting price declines is at record lows. Higher leverage has also helped fuel housing sales, making credit tightening more effective than before."

More than two-thirds of respondents said tighter credit controls would not put them off buying overseas.

A quarter of the properties bought around the world by Chinese investors are left empty, the survey reveals.

The survey shows that mainland Chinese demand for residential property responds to price and currency factors.

Over the six months to the March-April period when the survey was conducted, mainland buying of Hong Kong residential property had been strong with buyers attracted to the weaker US dollar-linked Hong Kong dollar, and a willingness of many developers to rebate stamp duty costs to buyers.

The weaker British pound also sparked renewed but cautious interest in the London market, the report said.

"Our survey shows a rising trend of mainland consumers owning residential property abroad, notable given our survey doesn't capture high net worth consumers," the report said. 

Tightening of credit by Australian banks to foreign buyers was also not much of a factor, with 56 per cent of mainland Chinese buying in cash, either from their own savings or with cash contributed by friends or family.

"The Australian market was very concerned by the settlement risk and strength of Asian buyers when the Australian banks decided not to lend as aggressively to Australian buyers," Wright said.

"But in most markets the Asian buyers of residential property abroad tended not to use local banks for financing."

Residential Property Chinese Buyers


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