The China Syndrome: Beller's Andrew Fawell on the Chinese-driven apartment frenzy

As one of Melbourne's largest independent real estate agencies with over 50 years experience, Beller Group has a fundamental understanding of the current Melbourne apartment market and the nuances which influence it. By way of establishing Beller China and forging an alliance with Beijing-based property agency giant Sagacity, Beller Group have gained an intimate, market-leading understanding of the factors behind the unprecedented rush of Chinese property buyers into the Melbourne market in recent years.

Days after arriving back from a Chinese sojourn, Urban.com.au sat down with Beller Group Director Andrew Fawell to learn his thoughts relating the wave of Chinese investors seeking their slice of the Melbourne market.

The Chinese perspective

To understand the Chinese property buyers attitude toward Melbourne at the moment requires a basic understanding of Chinese domestic affairs. Andrew believes the burgeoning middle class have never before had so many sources of information in order to make considered decisions, thus many Chinese nationals are now taking steps to secure their wealth and long term prosperity.

With the backdrop of China's economy slowing and a shifting political paradigm, middle class Chinese are investing overseas in record numbers - an exodus of wealth as a precursor to potentially leaving themselves. Property is considered a safer, secure method of parking wealth given the Chinese maintain a general aversion to shareholding.

Asked to further elaborate, Andrew stated that whether it materialises or not there is a growing perception amongst Chinese that their economy is susceptible to collapse, and as such those in a position to do so have sought out the safety of markets such as Melbourne in which to park their wealth. With Melbourne's solid fundamentals, excellent quality of life and strong political foundation, it's seen as a prime destination for Chinese.

Base upon first hand experience through Beller China, Andrew also emphasises the ostentatious nature of middle class Chinese who delve into offshore property purchases. A strong number of buyers into markets such as Melbourne are not particularly bothered about a given property's value or it's ongoing capital gain, but rather they want to be seen to be doing something.

This in part has given rise to the "Fly to buy" element of the market as they have been christened. Somewhat incredulously Andrew reeled off numerous instances where Chinese nationals have flown into Melbourne for the sole purpose of purchasing single/multiple apartments, only to leave immediately thereafter.

The importance of relationships in China

We are delighted to announce the new partnership with Sagacity China. Not only will this facilitate introductions to new markets in China, but also importantly, we will be able to facilitate deals with major Chinese developers to buy development sites in Melbourne. Like any good relationship, it will be a two way conversation and one of mutual benefit.

Andrew Fawell

Official PR statements aside, Andrew believes the key to the above comment is the penetration of new Chinese markets. Evidently the current crop of buyers reside in primary or first tier Chinese cities such as Shanghai oe Beijing. As buyer experience and information flow heightens, the buyers sophistication naturally increases.

To that end Beller Group are of the opinion that should the initial wave of first tier Chinese buyers double dip into the Melbourne property market, they will most likely avoid the masses of apartments on offer in Melbourne's CBD next time around and exercise a level of knowledge by purchasing in smaller developments beyond the CBD.

Paraphrasing Andrew Fawell, the initial wave of buyers content to buy into large developments within Melbourne's CBD will dissipate, in turn replaced by a new wave of Chinese buyers from second tier cities who are just now delving into offshore property purchases without the same benefit of hindsight as the initial tranche. Put into perspective those second tier cities such as Tianjin, Chengdu and Changsa and Qindao have metropolitan populations averaging over 10 million which enforces the theory that Chinese investment into Melbourne property and principally apartments will only balloon further.

The Melbourne perspective

The vexed question of the current state of the Melbourne property market has been a hot topic in recent weeks. Andrew Fawell considers the Chinese influence on the local apartment market a game changer where fundamentals have been altered, effectively covering some of the market deficiencies that have arisen in recent times.

At this point Melbourne has moved into the top handful of cities preferred by Chinese property investors, usurping Vancouver whose market was stymied by Government intervention. Asked of the prospect of Government responding with similar measures here Andrew suggested that if the current situation is allowed to run unchecked, the specter of such a move would increase.

Andrew Fawell also raised the notion of a two-paced local property market with pitfalls for the unsuspecting investor, whether they be local or international. Certainly in some areas of Melbourne there remains strong buyer and rental demand for smaller, well positioned, higher quality apartment projects, whilst a looming glut of rental stock in and around the CBD may cause havoc even though the demand to buy particularly from offshore parties will remain robust.

Interesting times ahead!