Chinese investors’ drop Australia for UK property

Chinese investors’ drop Australia for UK property

Chinese property investors are shifting their focus from Australia to the UK as market regulators increase pressure on banks to curb foreign lending, in an attempt to moderate rapidly rising prices.

Summary

  • Four major Australian banks have stopped issuing loans to non-resident borrowers with no domestic income
  • The proportion of new property sales accounted for by foreign buyers in Australia fell from 16.8% to 10.9% over the last two years
  • Chinese investors are now looking to secure property assets within other foreign markets, with the UK proving to be particularly popular

Falling from 16.8% to 10.9%, the past two years have seen a reduction in the number of Australian property sales accounted for by foreign buyers, as Australian banks block lending to foreign buyers.

Four major Australian banks, NAB, Commonwealth Bank of Australia, ANZ and Westpac have all halted the issuing of loans to non-resident borrowers with no domestic income. “We have essentially shut down mortgages to non-resident buyers,” said, Shayne Elliott, ANZ’s Chief Executive.

The apartment market has been particularly affected by these new regulations. Building approvals for apartments fell by a fifth in the year to end-December, while unit prices in Melbourne and Brisbane, only saw a marginal increase of 1.7% and 2.3% respectively last year.

Many Chinese investors who purchased apartments off plan three years ago are now struggling to secure finance, and those contemplating buying Australian assets are becoming increasingly nervous about the instability in regulation, tax and lending rules.

As a result, an increasing number of Chinese property investors are re-directing their focus from Australia to other foreign markets such as the UK, where after the Brexit vote Chinese investment interest in Britain grew by a third, as a result of a fall in the value of sterling which rendered property significantly cheaper to overseas buyers.

Named in 2016 by HSBC as the city with the highest yields in Britain, Manchester offers great investment potential for well capitalised developers, and is currently receiving substantial interest from Chinese investors, with the final quarter of 2016 marking a 50% increase in enquiries.

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