June 2, 2024 by Dymphna

Are foreign buyers to blame for housing crisis?

I reckon this is more politics than policy.

Peter Dutton recently proposed a two-year ban on foreigners buying property, as a way to help affordability for locals.

The general sense was that foreign buying was just too small of a share of total buying to make all that much difference, especially since, at least technically, foreigners aren’t allowed to buy existing property and have to buy new property.  (In practice, it’s a different matter.)

But foreign demand does have to have some impact. And even if it’s only 5% of the market, 5% is still 5%, and does make a difference at the margin.

I mean, it’s certainly not going to drop house prices by 50%, but maybe it helps a little (although any impact will probably be swamped by other market forces.)

But it comes at an interesting time, because we’re getting mixed signals about the state of foreign demand.

The Australian was running a piece the other day that said Chinese buyers in particular are selling up shop, especially in Queensland.

According to Mike Zhang, an agent on the Gold Coast who specializes in real estate transactions for Chinese customers, many Chinese people are currently in a desperate attempt to sell their pieces of Queensland.

Troubled Chinese sellers are desperately trying to send money back to China in order to save their failing companies, causing a real estate “landslide.”

“The sell-off will continue as long as China’s economy has not recovered,” he asserts.

… As well, many members of the aspirational middle class in China have become distressed sellers as a result of stringent capital restrictions, increased state taxes on Australian property owned by foreigners, interest rate hikes in Australia, and the terrible health of most of the Chinese economy.

According to Peter Li, managing director of Plus Agency, his Sydney-based company continued “buying, buying, buying” for its Chinese clientele prior to the epidemic.

“We still service a lot of our Chinese clients.” “We are now assisting them in selling, selling, selling.”

This is anecdata, so it’s very hard to know what to make of it.

So far, the best data we have on foreign buying, from NAB’s quarterly survey, hasn’t shown much of a decrease in foreign interest, although maybe it’s starting to roll over a little.

But at the same time, PropTrack’s Overseas Search Report, shows that overseas search volumes to rent (+32%) and to buy (+20%) on realestate.com.au were much higher than the five-year average in April.

So maybe certain segments on the global community are starting to pull back their buying. But it doesn’t look like it’s having a huge net-impact so far. Maybe they’re just being replaced by other buying groups?

Anyway, at the end of the day, I expect this is just political pillow talk. I don’t think for a second that Dutton will actually ban foreign buying. It’s good sound-bytes, but I don’t reckon he’s serious.

So I can’t see it having any impact on the market.