In a sign of the times the Australian government recently introduced a number of measures making it more difficult for overseas investors to acquire Australian real estate. While Australia is not the first government around the world to take such action a recent report suggested that the move has turned many Chinese property investors away from the country. This is all good and well when markets are stable but will the Australian authorities regret stigmatising overseas property investors and making it more difficult for them to acquire property assets?
Cracking a nut with a sledgehammer
A recent report commissioned by the Australian authorities highlighted the fact that overseas real estate investment, although it has grown in recent times, has little or no real impact upon market prices. While this report is in the public domain it seems as though the Australian population have overlooked this matter and politicians have certainly poured fuel on the fire. The consequence is that Chinese investors in Sydney and Melbourne in particular have faced growing public outrage and ongoing attacks in the local media.
The idea that Chinese investment in Australian real estate is pushing prices towards “bubble levels” seems to be a general misconception amongst the wider public. However, as ever politicians are looking to curry favour with as many voters as possible and they have played along with this public perception.
Is Australia losing long-term support?
As well as alienating many overseas investors the Australian authorities are likely to suffer from a general reduction in Chinese overseas property investment in the short to medium term. The forecast reduction in overseas investments together with negative press comment in Australia is likely to see more Chinese investors look towards the US. Indeed Chinese investment in US residential properties has increase from just over $11 billion in 2010 up to $28.6 billion in 2015.
It is all good and well offering support to local investors when real estate markets are flying high but what happens in the more difficult volatile times? Even though investors look at cold hard figures many will not forget the way they have been treated by the Australian political elite and the general public.
If we take a look at the Australian economy since 2008, the year of the US mortgage crash, there has been massive investment by Chinese individuals and companies into natural resource sectors such as mining, oil and gas. While this massive investment has begun to taper off it does not help long-term relations if criticism of overseas investment in real estate is aired but the authorities are happy to take Chinese investment in local businesses?
Many people forget that the Australian economy is one of few in the world not to have dipped into recession after the 2008 worldwide economic downturn. Much of this was down to enormous Chinese investment in mining, oil and gas as well as residential properties across the country. Will the Australian authorities live to regret their ongoing attack on Chinese real estate investors?