Chinese Investment in Australian Real Estate Fell 27%

The value of Chinese investment in Australian property fell sharply last year as tighter regulations both at home and abroad started to bite.

Capital controls, restrictions on bank financing to offshore buyers, and new foreign buyer taxes significantly reduced Chinese investment during 2017.

According to a new report by real estate website Juwai, which specialises in Chinese clients, the volume of Chinese buyers dropped by 26.8 per cent to $24 billion in 2017 compared to the previous year.

Despite the dip in investment, Chinese investors are still the most active off-shore players across the real estate market.

Juwai estimates there was about $100 billion spent on new dwelling sales last year, and about $25 billion of that was spent by foreign buyers, three quarters of which were from China.

Related: Are China’s Curbs on Outbound Investment an Opportunity for Australian Developers?

Juwai said it consulted hundreds of government, media, and industry sources to formulate its estimates in the latest report.

Of the acquisitions last year, $19.4 billion were residential property and $4.5 billion were commercial acquisitions.

Australia remains a favourite investment destination for Chinese, ranking second behind the United States in terms of inquiries on Juwai’s platform last year.

“The majority of our residential buyers are purchasing for their own use, because they have children studying or working here, or because they plan to visit regularly or to retire here,” Juwai chief executive Carrie Law said.

“Despite the higher stamp duties, Chinese still see Australia as a long-term value.”

New South Wales doubled its foreign buyer surcharge to 8 per cent last July, while Victoria and Queensland increased their rates to 7 per cent.

The Chinese government has also clamped down on the transfer of funds out of the country with local banks reducing credit options to offshore purchasers.

Juwai has forecast moderate growth and continued Chinese investment in Australia, which is in line with Beijing’s goal of managed, rational overseas investment.

“The trade war, lower economic indicators, and other factors may seem to give the current environment a negative cast, but investment managed to grow in 2017 despite a similar range of challenges,” Law said.

“We think it will grow again this year.”

Globally, Chinese investment in property rose 16.1 per cent to $168.3 billion in 2017.

It is understood that Chinese investors have turned their attention to Japan and Southeast Asia, particularly Thailand, for better returns than available in Australia.