Almost 80% of Chinese buyers can’t settle on the Australian apartments they’ve bought off-the-plan, with many wishing they could walk away from the contracts, said an investment expert.

“The off-the-plan apartments market is now the worst I have seen in the last 10 years,” Li Ming, co-director of real estate company Aussiehome, told The Australian.

Chinese investors are being hampered by Beijing’s recent crackdown on capital outflows leaving the PRC, including those being funnelled to Australia to pay for property investment. These restrictions, along with tighter lending criteria from Chinese financial institutions for property investment overseas, may be impacting investments in Australia.  

Chinese investors also appear to be shifting their interest to other types of property. “We are seeing a shift in ­inquiries from apartments to house-and-land, where they have risen 30 per cent overall in the last six months,” said Esther Yong, director of Chinese-language real estate website ACproperty.

Real estate agents based in mainland China like house-and-land deals, said Yong, because settlement, and thus their receipt of commission, is usually much shorter, whereas receipt of commission for apartments often takes two to three years.

“Chinese buyers are still active in the established property market, but they would like to extend the settlement periods in their contracts out to as far as 12 months, betting on changes within China that might lead to a loosening of lending policies and of the barriers to taking money out,” Li said.

“It is becoming more complicated, but I don’t think the rules are stopping anyone — they’re just slowing down the entire process. The major issue is not so much moving money, as the ­financing itself,” Yong said.

Wealthier investors prefer to keep a low profile, according to Li, as they do not want to attract too much attention. In Melbourne, many prefer to buy homes in Camberwell, Kew, Canterbury, Hawthorn, and Box Hill for $1.8m to $3.5m. The more conspicuous mansions of Toorak are now largely shunned by this group.

“Chinese investors still believe that Melbourne properties are worth buying compared with Beijing and Shanghai, if they can get their money out of China,” Li said.

Demand remains strong, and house prices in Melbourne’s eastern and southeastern suburbs should continue to rise this year by 10%-15%, according to Li. Demand would be boosted by a desire to be close to exclusive schools and universities.

In a research note released in September, Ivan Colhoun, chief markets economist at NAB, noted that the presence of a large numbers of foreign investors complicated not only the outlook for prices, but also settlement risks.

“Recent trends and reports suggest there has been a modest increase in delays in settlement rather than outright non-settlement. And it is typically foreign buyers that are now finding it somewhat harder to access finance and/or expatriate finance, the latter largely from China,” Colhoun said.

Related stories:
China’s Crackdown On Capital Outflows Could Hit The Aussie Property Market Hard
Chinese Property Investors Shift Their Focus From Australia To The UK

 

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