Chinese Homebuyers in the Land of Oz

SCMP: Australia’s most expensive home pitched to Chinese buyers

China’s property buying spree in Australia does not appear to be slowing, with the selling agent for a Sydney harbourfront property touted as Australia’s most expensive house targeting ultra-rich Chinese and said to be in serious talks with several potential buyers.

A new campaign with a strong focus on China was launched in February to interest foreign investors looking for high-end properties in Elaine Gardens, a grand waterfront mansion sitting on 6,986 square metres of land at Point Piper. The price tag is A$80 million (HK$475.8 million).

SMH: Chinese buyers double down on Australian property

Chinese appetite for property in Australia shows no sign of waning after buyers doubled investment in the nation's homes and offices for a second straight year.

Spending on Australian residential and commercial real estate rose to $24.3 billion in the 12 months ended June 30, up from $12.4 billion a year earlier and $5.9 billion in 2013, according to the Foreign Investment Review Board's annual report.

BI: Chinese investment in Australia is at its highest since the GFC

Chinese investors sunk almost $A15 billion into Australia last year.

And those state-owned enterprise and private investors, whose buying in Australia is at its highest since the GFC, are also upbeat about the local business outlook over the next three years.

Last year was the second largest inflow in new Chinese investment to Australia, behind the 2008 peak. Australia is the number two destination for Chinese investment after the US.

But...

Bloomberg: Commonwealth Bank Latest to Tighten Mortgages to Foreigners

Commonwealth Bank of Australia, the country’s largest mortgage lender, has tightened criteria for home loans to foreigners just as the central bank warned buying by Chinese posed an “indirect risk.”

Commonwealth Bank, which accounts for one in every four mortgages in the country, will no longer approve applications that cite self-employed foreign income, it said in a note to mortgage brokers dated April 18. The lender will also not accept the foreign-currency income of temporary Australian residents, who can now only borrow up to 70 percent of the value of a property compared with 80 percent earlier, it said.

Banks are concerned the housing market is turning.

Keen: Why the property bubble still hasn’t burst

At some point, the level of mortgage debt relative to income will stabilise; well before that happens, the acceleration of mortgage debt will decline, and prices will fall.

This has already happened twice in recent history in Australia: in 2008 and in 2010. On both occasions, deliberate government policy stopped the fall in prices by encouraging Australians back into mortgage debt — firstly via the First Home Vendors Boost under Rudd and secondly via the RBA’s rate cuts from 2012 which were undertaken with the hope they would encourage more household borrowing. In both cases the acceleration of mortgage debt resumed, as did the bubble in prices.

But couldn’t the government do that again, and keep prices rising? Yes it could: the RBA still has 2 per cent of rate cuts in its depleted arsenal and further cuts could entice yet more household borrowing. But each time this trick has been pulled in the past, the outcome has been ever higher levels of leverage. Today, Australia has the highest levels of mortgage debt and total household debt, in the world — more than 120 per cent of GDP compared to under 80 per cent in the USA and the rest of the West.