A significant surge in affluent Chinese buyers has resurged in the Australian property market, leading to price hikes across various property types, including luxury homes, newly built units, and large plots of land. After enduring extended Covid-19 lockdowns, many individuals in China are now seeking a better life in Australia, where they can purchase a family home with four or more bedrooms for the same cost as a unit in Shanghai.
During the first quarter of 2023, the foreign buyer market share in New South Wales (NSW) reached its highest level in eight years at 16.2%, up from 6.7% in the previous quarter, as reported by the latest NAB Residential Property Survey. Furthermore, the recent decision by Singapore to double its property stamp duty surcharge for foreign investors from 30% to 60% has prompted even more Chinese buyers to turn to the Australian market.
The upper north shore suburbs of Sydney have become particularly popular among Chinese buyers, who are willing to pay up to $400,000 above the price guide. Some buyers are able to make cash purchases, having saved money during the three-year lockdown period, while others only require small loans to complete their transactions.
Henny Stier, co-founder of OH Property Group, has observed the impact of these cashed-up Chinese buyers on the local market, stating, “They’ve absolutely distorted the local market…What used to sell for $2.5m-$3m is now selling for $4m and over.” Chinese buyers are not only interested in turn-key properties and units off the plan, but they are also keen on purchasing large plots of land for knockdown-rebuild projects.
St Ives, a suburb known for its non-conservation and non-heritage status, is a hot spot for Chinese buyers looking to knock down existing structures and rebuild new homes. In recent transactions, a four-bedroom home in St Ives sold at auction for $3.67m, which is $1.43m higher than its previous sale price in 2017. Similarly, a six-bedroom home that was previously sold for a lower price in 2021 recently fetched $7m from Chinese buyers.
The Chinese buying trend has taken the market by surprise, making it difficult to predict how long it will last, says Stier. As prices continue to rise, Chinese buyers are expected to move on to other suburbs such as Turramurra, West Pymble, and North Turramurra.
The strong demand from Chinese buyers reflects their established ties to Australia through permanent residency or family connections. According to Ray White Upper North Shore agent Jessica Cao, many Chinese individuals have lived in China and Hong Kong in recent years and have chosen to return to Sydney after the lifting of lockdown restrictions. Limited supply has contributed to the overall increase in prices, not just for luxury homes but also for land parcels.
The rise of the Chinese buyers in the Australian property market is seen as a “revenge purchase,” according to Juwai IQI co-founder Daniel Ho. While confidence in the Chinese economy and housing market declined during the pandemic, overseas markets like Australia have become more appealing alternatives. Ho explains that in China, there is a concept of “revenge spending,” where people splurge on things they were unable to buy during lockdowns.
Foreign buyers as a whole have become more prominent in the Australian housing market, with the latest NAB Residential Property Survey indicating an increase in their market share. In the first quarter of 2023, the market share of foreign buyers in new property markets rose to 7.9%, up from 5.2% in the previous quarter. In established housing markets, the market share of foreign buyers rose to 3.8%, a one percent increase from the fourth quarter of 2022.
For potential buyers who are being priced out by Chinese buyers, Henny Stier advises steering clear of the overheated markets and exploring areas that are currently not on the radar of Chinese buyers.
In conclusion, the massive influx of cashed-up Chinese buyers has had a disruptive effect on the Australian property market, driving up prices across various property types. This trend has been fueled by the lifting of Covid-19 lockdowns in China, prompting individuals to seek a better life in Australia. The surge in Chinese buyers has led to increased market share and price hikes, particularly in Sydney’s upper north shore suburbs. While the long-term impact is uncertain, the current trend highlights the appeal of Australian real estate for Chinese buyers as a “revenge purchase” and the need for potential buyers to consider alternative markets.
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