Could Chinese turmoil hit Australian real estate market?

The Australian real estate market has been a major beneficiary of overseas investment during the last decade or so and this is likely to continue for the foreseeable future. Indeed official figures suggest that upwards of $12 billion of foreign investment in the Australian real estate market can be traced back to China which has always been supportive of the country.

While a $12 billion investment is relatively insignificant compared to the overall size of the market, estimated at around $250 billion per annum, it seems that Chinese investors are still keen on Australian property. However, will the “correction” in the Chinese stock market make some Chinese investors think again and possibly repatriate their funds?

New developments in demand

At this moment in time experts in Australia have yet to see any real impact upon the Australian real estate market as a consequence of the turmoil in China. There is some speculation investors who have put down their 10% deposit on new developments may well struggle to cover the remaining payments in the short to medium term. However, should this be a real concern or is it just another scare story regarding Australian property?

Currency fluctuations

Even though some experts had expected Chinese investors to have already reduced their exposure to the Australian real estate market it is worth taking into account the short-term influence of the currency. The dollar has weakened recently which makes Australian real estate even more attractive for overseas investors. So, in the short to medium term it seems that any potential reduction in demand from Chinese investors has been delayed by currency movements.

It will be interesting to see as and when Chinese investors begin to take their foot off the investment peddle and what impact this has on the market. As we touched on above, overall Chinese investment in Australian real estate is relatively small as a percentage of the overall market but it has been growing in recent times.

Is this just another scare story?

Despite the fact that the Australian real estate market has been talked down time and time again by experts it still continues to attract major overseas investment. Indeed there is still domestic demand for Australian real estate although the sight of some developers bringing forward their projects could be a sign of impending weakness in the market?

The fact is that the weakness in the Chinese stock market, economy and real estate market will eventually impact Chinese investors. When this will occur is something of a guessing game at this moment in time although there is no doubt that the ongoing growth in Chinese real estate investment across Australia cannot carry on growing at the same rate.

Conclusion

It will be interesting to see as and when Chinese real estate investors take a step back from the Australian market, a market which has been extremely popular among investors for some time. Some experts are suggesting that a reduction in Chinese investment in Australian real estate would impact the wider market but this remains to be seen.