Why today's Chinese property investment is just the beginning: Andrew Taylor
We now live in an international world. Policy decisions made in one country can reverberate thousands of miles away.
Something that happened in Beijing in early June is still sending out shockwaves. It could lead to more than $98.5 billion of new investment in Australia’s property sector.
This momentous event was the Chinese government’s soft announcement of a new pilot program, named QDII2, to enable people to more easily move money out of China.
Most Australians have become accustomed to thinking of China as jealously guarding its borders, to prevent its citizens from investing overseas.
But, in fact, China’s government has a very public desire to increase its citizens’ and corporations’ international investments.
China also wants its yuan to rank right up there as a global currency, along with the US dollar, Japanese yen and British pounds sterling.
QDII2 starts with six cities, whose total population is more than 50 million. After testing the concept, the government hopes to roll it out to the whole country of 1.3 billion.
The total amount of wealth that would then been be freed, as reported in the Financial Times, to invest in international assets would be AU$8.5 trillion. Our conservative estimate is that about $98.5 billion of that will find its way into Australian real estate.
This is good news for the lucky country. Australia is just starting to reap some of the major benefits from Chinese investment. This latest change will multiply those benefits.
One benefit is, frankly, a higher level of architectural quality. It’s no surprise that a Chinese developer will build Australia’s first buildings by Pritzker Architecture Prize winner Dame Zaha Hadid.
Another benefit is the large number of new apartments coming into the market. New construction has soared since Chinese buyers entered the market.
Chinese are often willing to buy off the plan, so they give developers the pre-sales they need to start construction on projects that they otherwise couldn’t build.
The Property Council of Australia estimates that each Chinese purchase enables the construction of four additional new homes for Australians.
With increased Chinese international investment, Australia should continue to benefit. But, it is conceivable that the country lose its place as a favored destination for Chinese buyers.
There is intense international competition for Chinese investment. Conditions in other destination countries may become more attractive.
Or, Australia could lose its appeal, either due to market conditions or bad policy decisions.
Australia’s economy needs foreign investment. QDII2 presents a huge new opportunity to attract that money. Let’s see what Australia does about it.
Andrew Taylor is the founder and chief executive officer of sales and marketing at Juwai.com, the number-one Chinese real estate portal for property in Australia and around the world. Find out more about him here.
