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China’s cabinet recently imposed new controls on the nation’s shadow-banking industry, targeting off-the-books loans. The result? China faces a record drop in new credit levels which could lead to further foreign investment in the Australian Property Market.

“Your Investment Property” magazine recently reported that Australia represents the perfect place for Chinese investors to obtain finance for real estate purchases. This means lenders throughout Australia are likely seeing increased activity from foreign buyers, and will continue to do so for the foreseeable future.”

According to estimates by the Chinese-language Juwai web portal, Chinese investors spent a total of 5.4 billion yuan (A$992m) buying houses in Australia [as of the end of 2013].

The site estimated that 63.1 million Chinese have the financial capacity to purchase housing overseas and that these people were conducting some 90 million searches online for housing every month.

We can see that foreign investors purchasing residential property in Australia is having an increasing impact. The steady increase in the proportion of loans arranged for investors has risen steadily in recent times. Investors traditionally account for around 20%-30% of new mortgage approvals. Industry groups believe this figure is rising and now sits at just under 40% of all mortgages issues.

This does not assist first home buyers [from an affordability perspective]. Therefore, with added pressure from foreign investors, it appears that throughout the coming 12 months, the number of loans for investors will continue to outstrip those to first home buyers.

Property Observer website recently reported that Chinese real estate buyers have gone from being hardly there to being everywhere in the property markets.

The website claimed “Chinese are the biggest international buyers of property in Queensland. They are also number one nationwide, when ranked by growth and momentum.”

Chinese immigration, which accounts for some of the Chinese buyers, is a boom for Australia. The Wall Street Journal has reported that increases in migration from China in one year lead to a stronger property market three years later, in the form of better sales prices.

Property Friends is a specialist Property Investment Advocacy that has been operating for the last 13 years on the basis of 3 principles: Trust, Community & Progress. www.propertyfriends.com.au (03) 9758 5331

Image design by: Freepik

Uwe Jacobs Property Strategist

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