March 28, 2014 by Dymphna 17 Comments

The Real Estate Recovery Has Just Started!

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It’s easy to come to the wrong conclusion on things when you’re only given incomplete information…

And when it comes to the Aussie economy, and specifically the real estate market…

Getting incomplete information and many contrary opinions is like ordering the menu at a Chinese restaurant…

You’re going to get a little bit of everything!

Now, I’ve talked about the effect of not building houses and blocks of flats for several years has on our property market…

Demand for housing grows over the years as teenagers become adults, leave their parents’ houses, start having kids, and need a new place to call home.

Then there’s the mining boom/bust cycle that’s taking place here and there…

China is the BIG news

But the biggest news when it comes to the Aussie economy lately is what’s going with China.

The media and some experts are predicting that an economic slowdown in China will mean bad economic news for us, too.

But what’s the real story about all of that?

Let’s take look at China and see what’s going on…

It’s true that China’s economic growth has slowed in the past year or so…

Last year, China’s growth rate was the lowest level since 1999.

And yes, China imports a lot of what we produce from mining around the country…

Especially coal.

On the face of it, a slowing Chinese economy is definitely not what we want to see…

China is the workshop to the world and utilizes amazing amounts of raw materials for its huge manufacturing sector.

China’s slowing growth doesn’t the same for Oz

Fortunately, a Chinese slowdown isn’t a simple translation to an economic slowdown everywhere else.

For instance, some experts warned of lower imports from Oz due to their falling growth rate and some very serious air pollution problems…

But Australian coal exports to China went up by 30 per cent last year!

More than that, the latest report from the Bureau of Resources and Energy Economics (BREE) expects that number to grow this year by about 7.4 per cent…

And BREE expects our iron ore exports to China to grow an amazing 22 per cent!

There are other factors to think about as well…

Cashed up Chinese leaving China

Like the millions of cashed-up Chinese who are leaving China behind.

And just how many “cashed up” Chinese are rich enough to buy houses in Australia?

Over 63 million!

What’s more, many if not most of them are either looking to leave or are considering doing so or at least investing outside of China…

At first, Chinese investors set their site on places like Hong Kong…

A rush of mainland Chinese buyers caused housing prices to inflate there, resulting in unrest and resentment against the outsider Chinese investors disrupting the market prices for Hong Kongers…

A 15 per cent foreign buyer tax against Chinese investors has successfully discouraged many of them…

Those Chinese investors and émigrés have now set their sights on Australia.

If you live in Sydney or Melbourne, you will have felt the effects of the “Chinese exodus” already.

Foreign demand, that is, Chinese demand for housing and investment properties in those two capital cities in particular has driven prices up rather quickly…

Housing prices in Sydney, for example, went up 15 per cent last year!

It’s no secret that Aussie real estate firms are setting up offices in places like Beijing and Shanghai to capture those buyers before they even leave the country…

The fact is, China’s economic slowdown as well as the horrendous pollution problems that they certainly have, are both driving factors in the rich now wanting to leave China.

And you know what else?

The effects of that are just now beginning to be seen…

Chinese investor impact bigger every year

The full impact of the Chinese buyers of Aussie real estate will take years to be fully understood and known.

But in the last three years alone, the number of Chinese buyers in Australia has grown 900 per cent!

As the Chinese government continues to relax its restrictions on its wealthy citizens moving abroad or simply buying overseas properties, we can reasonably expect that number to become much, much higher.

And quite often, these Chinese buyers are picking several units at a time in a block of flats for family members and investments…

As well as being quite content to pay premium prices…

They have been known to pay $100,000 or even $200,000 above the market price in Sydney and Melbourne!

Is it any surprise that we’re seeing price inflation?

Now, of course, there are restrictions in Australian laws regarding foreigners buying up property here.

For example, foreign buyers are not allowed to buy second-hand homes…

That is, without an exemption from the Foreign Investment Review Board (FIRB).

They must also apply for approval to buy new homes as well…

But exemptions to the law have become the rule, as applications are virtually guaranteed to be approved.

So far, there’s no sign of curbing Chinese investment in Oz…

Now that you know some of the other forces at work in the Aussie property market, when you hear the doomsayers sing their sad songs of a real estate crash…

Just give them a smile as you pick up your next deal.