Public opinion continues to be divide by the large scale of Chinese investment Residential into Australia’s residential property market. Chinese buyers are often blame in Australia for driving up house prices and creating the current affordability crisis.
However, Chinese offshore sales are quite low. We estimate that Chinese residential real property investment accounts for around 2% of all Australian residential real estate transactions. This is based on approval figures from the Foreign Investment Review Board (FIRB), ABS data and our own data. In legal terms, Chinese investors are those who need approval from the FIRB to purchase residential property.
This figure is calculate by subtracting the estimate Chinese residential real-estate investment volume from total residential real-estate transactions. Based on FIRB statistics, residential property investment by Chinese investors was A$5.8 million in the financial year 2013. This is consistent with data from KPMG/University of Sydney on Chinese investment in Australia.
The total value of Australian residential property sold in the same period according to the Australian Bureau of Statistics was A$258 Billion.
Commercial Vs Residential
For the financial year 2013-14, we estimate that residential property investment by Chinese investors was A$5.8 trillion. This estimate is based on FIRB data that lists the total value of all approved real estate investments in each country. It does not distinguish between residential and commercial real estate.
Only foreign investors approve for total investment can split into residential and commercial real estate. The ratio of residential and commercial real estate was 53:47 for 2013-14. This ratio is compare to A$12.4 trillion in Chinese real estate investments. We get an estimate of A$5.8 Billion for residential and A$6.6 Billion for commercial.
Keep in mind that FIRB approval numbers are often higher than actual investment figures. The KPMG/USYD database reveals that commercial real estate investment was A$4.4 trillion in 2014. This is less than the FIRB approval numbers.
Residential Property’s Total Sales Value
The ABS registered 482,720 property transfers for the financial year 2013-14. The average price for residentials property in Australia rose 6.3% to A$516,300 from the September 2013 quarter and to A$548,900 in June 2014. We calculate the total value of residentials property sold in Australia using ABS quarterly Residentials Price Indexes data.
The Size Of Chinese Investments
According to FIRB data, 13.4% of residentials real estate investment is made abroad, Residentials with only 2% of that coming from China. These estimates align with the NAB Quarterly Australian Residentials Property Surveys. These estimates show that foreign buyers are interest in new properties at 12.5% to 10.2%, and established properties at 8% and 7.2% respectively for FY 2013-14.
The issue of foreign investment into the Australian residentials real property market is likely to continue despite declining economic growth and a weakening Australian currency.
Commentators need to at least look at the data before suggesting that Chinese investors are responsible for declining affordability.
Data sets that are use to provide information on Chinese investments in Australian real property come from different sources. They can produce different results and produce different results. In its 2014 Report on Foreign Investments in Residential Real Estate, the House of Representatives Standing Committee on Economics highlights the discrepancy in official ABS and FIRB data. It concludes that no detailed information on Chinese investments in Australia’s residentials real estate markets is available.
Based on our data, however, Chinese residentials real estate investment accounts for only 2% of total real estate sales volume in Australia. Chinese applicants for approval for residentials real-estate investment approval make up one-sixth of the potential foreign investors in real estate. This indicates that the housing affordability and housing crisis is not going to be solved simply by clamping down on one group.