June 1, 2020 by Dymphna

The China Effect – What’s Happening Right Now and What Can You Expect?

China has a huge impact on the Australian real estate sector. In this article, we talk about what’s going on in the country and what that may mean for you in the future.

This pandemic situation has a whole lot of people panicking. And as an investor, you’ve likely seen a huge decrease in demand for your properties.

The first message we want to convey to you is this:

This is normal!

The entire world is on lockdown. That means nobody’s coming into the country, which affects demand. But even domestically, people don’t want to commit to buying or renting during this situation.

But this is a short-term thing.

Eventually, this situation will end. And as an investor, you’ll be in a great position to capitalise.

So… what does this have to do with China? The country is in the title of the article, after all.

Let us explain just how big a role China will play in your future as an investor.

What is China to Australia?

On a national scale, China is one of the biggest trading partners that this country has. And what’s happening with the economy right now is proof of that fact. 

Recall that this entire situation started in China. It was also the first country to go into lockdown. 

And when you remember that China is responsible for a huge amount of the world’s imports, you can understand the impact. Warehouses shut down. The people went on lockdown. And the ripple effect from all of this affected the economy on a global scale.

With China being one of our biggest economic partners, it’s natural that we’re seeing some effects.

If you look at the impact on China itself, you’ll see that its economy slowed down enormously. However, there’s also good news on the horizon…

It All Comes Down to Coal

In a recent I Love Real Estate presentation, we showed our viewers some charts about coal in China. It’s one of the most used fuels in the country. And in this lockdown, we saw consumption of coal shoot right down.

That makes sense.

With no factories or warehouses open, the need for fuel decreases.

But we also showed another, more recent chart about coal.

And this chart highlights the fact that coal consumption has started to increase again in China.

This means that China is slowly getting back to business. 

The reason we want you to understand this is that China was the starting point for this whole situation. And all of the stats we’re seeing right now show us that the country has started to come out on the other end.

This is the same pattern that we can expect in the world’s other major economies.

Granted, the timescales will be different. As a communist country, China cuts through a lot of red tape that democratic countries have. The point we want to make here is that they’re already seeing signs of recovery.

But we know that you have a major question…

What Does This Mean For Australian Real Estate Investors?

There are two things that we want to cover here:

  • Chinese investment into Australian real estate.
  • Chinese tourism habits.

Both of these things will have an impact on our markets going forward.

Chinese Investment into Australia Real Estate

There’s a huge demand for Australian real estate in China. The figures show us that Chinese investors pour more into our real estate than investors from any other country.

Think about how this relates to the current situation.

With China going on lockdown, that demand from overseas investors dried up. As a result, property prices fell because owners had fewer options for selling.

But this is a short-term situation.

With China already starting to recover, we’re going to see that demand spike up again. Keep in mind that it may not happen until Australia begins its own recovery. But the good news is sentiment from Chinese investors hasn’t changed in regard to the Australian property market.

They still want to buy. It’s only external circumstances that have stopped them from doing so.

We predict a huge influx in interest from China once this situation resolves itself. And as an investor, you stand to profit from that increase in demand.

Chinese Tourism Habits

More than 9 million international tourists come to Australia every year. And of those, 1.4 million are Chinese.

This is the largest number of people from any one country.

And it’s also on the rise. In 2018, we saw 12.9% more Chinese tourists come into the country than we saw in 2017. And on top of that, Chinese tourists also spend more money in Australia than tourists from other countries.

Tourism is the biggest export that Australia has. And obviously, it’s taken a huge hit because of the coronavirus situation.

But let’s bring it back round to real estate.

As an investor, you may have several holiday rental properties that you’re holding onto. And you’ve likely hosted more than a small number of Chinese tourists in those properties. 

That isn’t going to change.

Again, the rebound that we’re seeing in China will happen all over the world. Eventually, we’ll solve this crisis and Australia will reopen its borders.

Think about what will happen then.

There will be a huge number of Chinese tourists who didn’t get to visit the country in 2020. On top of that, they’ll have the money needed to visit later because China’s economy rebounded faster than any other country.

If you own a holiday rental property, you stand to benefit from an influx of tourists. And those tourists will bring money that will help the wider Australian economy recover.

We Will Recover From This

China is already showing signs of recovery. And we’re sure to see similar signs in the coming months for every country in the world.

Australia will be no different. And with China already rebounding, property investors in this country stand to benefit.

So our message to you is to look to the future. Right now is just a temporary blip caused by a situation that’s beyond your control. 

If you’re patient today, you will profit tomorrow.