What China’s stock market meltdown means for Australian real estate: Juwai's Andrew Taylor
Think about these five facts:
1. China is now Australia’s biggest trading partner.
2. Bloomberg says our links to China have quadrupled in five years.
3. Last year, Aussies sent 36 percent of our exports to China.
4. That’s more than any country in the Organisation for Economic Cooperation and Development.
5. China invested, reports the FIRB, $12.5 billion in Australian real estate last year.
When I read all this, the first thing that pops into my head is, “Thank goodness for China.”
If there were no China, Australia would have missed out on the boom of the last decade, which has been one of the greatest wealth-generators in our history.
It was bigger than just resources, but during the boom the mining companies alone invested four times more money in Australia than the US transferred to Europe in the entire post-war Marshall Plan.
In the property sector, many of the new buildings that have gone up in suburbs all over the country since the year 2000 simply wouldn’t have been built without China. Developers, the RBA and the government’s recent Parliamentary inquiry all agree that off-the-plan sales to Chinese buyers have been the key to unlocking new housing supply.
After feeling good for a few moments, a question then occurs to me. It’s this: “What happens now?”
What does the recent plunge in China’s stock market means for Australian real estate?
There are two ways to answer that.
The first is with the short-term answer. Over the past month, Chinese demand for international property has remained normal. No high peaks. No deep plunges.
At Juwai.com, we’ve seen it in the numbers of people coming to our website to make inquiries to agents. We’ve seen it in the deals that agents report they are making. And, we’ve seen it in our call center, where our team responds by phone, social media and email to buyer questions.
Some people expected international property buying to rocket upwards as Chinese rushed to escape their gyrating stock market. But there’s been no change.
The second way to answer the question is by looking at the long term.
Over the long term, the turmoil in China’s equities market have given Chinese one less reason to invest in equities and one more to invest in international real estate, which just goes from strength to strength.
Australia’s currency has plummeted, giving Chinese consumers a 15% to 20% boost in their real estate buying power. (Of course, it’s been less fun for those who bought their Australian investment five years ago and since seen it’s value in Chinese yuan drop.)
The government is, in fact, encouraging Chinese families and companies to invest in places like Australia.
China’s low savings account interest rates mean that overseas investment can be a better bet for generating returns for the country’s huge savings reserves.
So over the short run, Chinese buying has been stable and in future years it will only grow.
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.
