Chinese Buyers Expected to Boost Price of Sydney Homes by 10%

Now that the Singapore and Hong Kong markets have been picked clean by Chinese investors, Asia’s new rich are moving into Australian homes, according to a recent report.

McGrath Estate Agents of Australia expects the price of housing in Sydney to rise by as much as 10 percent during the coming year, with buyers from China playing a key role in this price surge. According to local property data, as much as 80 percent of home sales in some areas of the Australian city are to Chinese buyers.

In a recent interview on Bloomberg TV, John McGrath, the CEO of the agency was outspoken regarding the impact that Chinese buyers are having on the Sydney market.

“The Chinese market is extremely strong, the strongest I’ve seen a new entrant into the market,” Mr McGrath said. “Record low interest rates, the ability to fix such rates for a long period of time is very attractive.”

In the same Bloomberg segment, it was pointed out that wealthly Chinese spent more than US$6.5 billion on Sydney real estate from January 1 to June 30th of this year.

Aside from the increasing wealth of China individuals, the reason for the surge in Chinese spending can be traced to policy restrictions on home buying in China and other markets in the region favored by Chinese.

Since April 2010, China has been restricting purchases of homes to attempt to cool down housing prices and maintain affordable housing for the majority of citizens. Because of a lack of alternative investment vehicles, this has pushed many wealthy Chinese to look for real estate investments elsewhere.

The impact of these roving Chinese investors was first felt in Singapore and Hong Kong, where prices rose sharply in 2011 and 2012, until local governments put in place measures to discourage purchases of homes by non-residents.

Now with Singapore and Hong Kong looking less attractive, and policy restrictions still in place in China, Australia appears to be one of the favored destinations for Chinese real estate investors, and Sydney is not the only city to be feeling the impact of these wealthy individuals from China.

In the city of Brisbane in northern Australia, one agency has already launched a China desk, and brokers are already publishing promotional materials in Chinese.

Throughout Australia during 2012, Chinese buyers accounted for $4.2 billion of transactions, a 75 per cent jump from 2010, according to data from Australia’s Foreign Investment Review Board.

However, the impact in Sydney appears to be in clear focus this week. During the Bloomberg interveiw, McGrath revealed that at a recent property auction in the Sydney suburb of Eastwood, all 38 bidders who registered were of Asian ethnic origin.  The property on auction sold for AU$2.39 million, more than $1 million over the reserve price.