Tuesday, November 1, 2011



Chinese Buyers Sway Australia Property Market

SYDNEY—Conventional wisdom says a nation's house prices swing with its economy. In Australia, economists are paying increasing attention to another factor: Chinese immigration.

Wealthy Chinese are now among the biggest buyers of real estate in Australia, picking up properties ranging from modest suburban homes to waterfront mansions with views across Sydney Harbour.

In one of the biggest purchases this year, a Chinese buyer spent more than 50 million Australian dollars (US$46 million) for Altona, a home in the Sydney suburb of Point Piper that's frequently been rented out to celebrities, including U2 frontman Bono. Weeks earlier, another Point Piper mansion—dubbed the Bang & Olufsen House because it resembles a hi-fi system—sold to a Chinese buyer for more than A$30 million.

Now the influx of Chinese money is starting to skew Australia's real-estate data, which is closely watched by policy makers including the nation's central bankers. Economists at Citigroup Inc.,retooling the computer model that churns out the bank's predictions for house prices, found a previously unknown connection: Shifts in levels of Chinese migration were consistently echoed, three years later, by changes in property prices. So strong was the relationship that Citigroup has now worked it into its equations.

"The story of the rich Chinese businessman snapping up a A$40 million mansion in Point Piper is a trend that isn't likely to end anytime soon," said Joshua Williamson, a Sydney-based economist at Citigroup.

The bank said the reason for the correlation isn't clear. It didn't find a similar relationship between total immigration and property prices.

"It could be that Chinese immigrants have the income capacity and desire to buy property, more so than other nationalities," said Paul Brennan, chief economist of Citigroup's Australian operations.

Australia has long courted China's affluent. The first visa in a program that lets foreigners settle in Australia for up to four years in exchange for investing A$5 million went to a Chinese toy maker.

In the fiscal year ending June 2011, more immigrants arrived in Australia from China than from any other country. Although immigration from China fell 9% the next year, to rank behind arrivals from New Zealand and India, analysts and realtors point to several factors that should keep buying interest in Australian property strong.

For one, curbs on property speculation in China are forcing investors there to look internationally. Australia's schools are also a drawing card. International education is big business—generating about A$14.5 billion in export revenue last year to rank behind only iron ore, coal and gold—and a survey this month by HSBC this month showed growing interest in property purchases among parents of Chinese children studying in Australia.

Bloomberg NewsSydney's Point Piper, site of the A$50 million home
The falling Australian dollar—down 10% against the U.S. dollar over the past two months—is making property more affordable for overseas investors, says Richard Simeon, a real estate agent in the Sydney waterfront suburb of Mosman, which has panoramic views of Sydney Harbour.

Mr. Simeon, who has sold close to A$30 million worth of homes to Chinese buyers in the past few months alone, has to work in bulk to meet demand from wealthy clients. "I'm putting on a bus and taking them around and then trying to find out their price ranges," he said.

To be sure, Australia restricts the type of property that can be owned by foreigners, in a bid to limit the potential for a real-estate bubble. Nonresidents can't buy an existing home, and temporary residents who buy one must sell it when they leave. But anyone can buy and keep a home under construction or buy a vacant lot and build a home.

China accounted for A$4.19 billion, or 7%, of the A$58.40 billion of foreign investment on commercial and residential real estate in Australia in the year ended June 30, up slightly from a year earlier, according to Australia's Foreign Investment Review Board. That ranked it third behind the U.S. and Singapore. Data measuring investment by Australian citizens of Chinese birth isn't available.

While early real-estate deals overseas involved wealthy elites, this is starting to shift as middle-class incomes rise in China. "Now there is a bigger bracket,".



An investment of A$5 million can yield Australian residency under a recently launched visa program. Alan Lee of Moisson Group tells the WSJ's Deborah Kan why his Chinese clients are attracted to Australia.

Australia said that so far it has attracted 170 applicants to a new program to develop foreign investment by offering overseas millionaires the right of residency in return for a portion of their wealth, in a bid to help the country compete better against other nations for money and expertise from abroad.

The so-called significant investor visa was launched in November. If all those made so far are accepted, the applications, believed to be mostly from China, would translate into inbound investment of at least 850 million Australian dollars (US$877 million).

AFP/Getty Images
Australia's Sydney Opera House in Sydney harbor.

The program lets foreigners settle in Australia for up to four years, then seek permanent residency, in exchange for a minimum A$5 million investment during their stay. The money can be placed in federal or state bonds, managed funds, Australian companies, or in a combination of those assets.

The push by Australia to start attracting foreign investors by offering them residency comes as the country faces what Finance Minister Penny Wong terms a new reality, as a decadelong mining boom evaporates amid a slowing global economy.

The country is also playing catch-up with others offering visas to the wealthy investors. Its neighbor New Zealand, offers visas to those willing to invest as little as 1.5 million New Zealand dollars (US$1.3 million). And the U.S., a magnet for Chinese investors, grants green cards to qualifying foreign nationals for investing as little as $500,000 in a qualified U.S. business that creates a minimum number of jobs. In the fiscal year ended Sept. 30, more than $1.8 billion was raised by the U.S. this way and 7,641 foreign nationals were issued visas, 80% of them Chinese.

In Australia, successful applicants are allowed later to apply for permanent visas. There is no upper limit on the number of special visas the government can grant. Consultants at Deloitte expect the total to climb to around 700 a year, potentially at least A$3.5 billion in fresh foreign investment.

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But not all applications are guaranteed to succeed.

The department of immigration said it had granted the first significant-investor visa to a Chinese toy manufacturer and his family. A spokesman for the department said that following a four-month assessment of the his application, the candidate made a A$5 million investment in Victoria state bonds. The government declined to identify the successful applicant.

"Australia is in active competition with other countries across our region for successful, high-wealth individuals and the capital and business acumen that comes with them," Immigration Minister Brendan O'Connor said last week.

While the program is open to all, Chinese nationals are likely to be among the biggest takers, according to people involved with the program.

Indeed, the ranks of China's wealthy have risen. PricewaterhouseCoopers estimates China has more than a million millionaires and about 60,000 "super rich," or people with more than A$15 million to their name. The special Australian visa has a unique identifier number "188," making it distinct from the traditional "457" visa given to most temporary foreign workers.

Adding to the allure of the investor visa, the government has created a new subclass of permanent visa to go along with the program, "888," a number many Chinese associate with wealth.

"Clearly, the whole thing has been targeted at China so far," said Bill Fuggle, Sydney-based head of financial services Baker & McKenzie, which advises clients, including many Chinese, on significant-investor visas.

The government's openness to wealthy foreigners contrasts with its approach more generally to immigration, a polarizing topic in Australia, particularly ahead of an election only four months away. Prime Minister Julia Gillard has pledged to clamp down on the "457" temporary work visas.

The Labor government, which opinion polls suggest will lose the Sept. 14 election to the center-right Liberal Nationals, has proposed changes to the 457 temporary work visa system and has said it would "put Aussie workers first" as the nation's economy has slowed, led by a cooling in the mining sector.

Foreign investment, particularly from China, is a hot-button topic in Australia. Last year, conservative lawmakers, particularly from rural areas, attacked the government for allowing the takeover of a large cotton farm, Cubbie Station, by a Chinese-led consortium.

Treasurer Wayne Swan labeled their views as "xenophobic claptrap" at the time.

In 2011, the government rejected a takeover of Australia's main bourse operator, ASXLtd., ASX.AU +0.60% by Singapore's main exchange, saying the deal was against the national interest.


Corrections & Amplifications

Australia's significant investor visa has attracted applications that could translate into inbound investment of 850 million Australian dollars, or US$877 million. An earlier version of this article incorrectly valued A$850 million at US$1.1 billion.


    PUBLISHED MARCH 06, 2014

    China buyers to prop up Aussie home prices

    Investment over next seven years can push home prices even higher: study
    So far so good: The Credit Suisse report found that Chinese buyers bought 12 per cent of new housing nationally per annum, an amount considered insufficient to drive prices up across Australia. - PHOTO: BLOOMBERG
    [SYDNEY] Wealthy Chinese will pour A$44 billion (S$50 billion) into Australian real estate over the next seven years, potentially pushing prices in one of the world's most expensive housing markets even higher, a study said yesterday.
    Investment bank Credit Suisse used data from the Foreign Investment Review Board and other government agencies to estimate the amount of Chinese investment in Australian residential property at more than A$5 billion a year.
    "They purchased $24 billion of Australian housing over the past seven years; we forecast they will purchase $44 billion over the next seven, to 2020," it said.
    As the Asian powerhouse becomes richer, the ranks of those who could easily afford Australian real estate will swell beyond the current 1.1 million people, with implications for Australian home-buyers, it said.

  • Chinese Investment in Australia