Large numbers of Chinese investors in Australian property have had to sell their assets due to restrictions on capital outflows.
Beijing introduced the new capital controls in November, in a bid to keep money in the country. Any capital transfer of $5m or more by companies or investment funds is now closely scrutinised, with Chinese banks requiring customers to explain how they will use the funds.
Now Australian housebuilders, developers and estate agents are offering large discounts to local buyers in order to fill the gap created by ‘international deposit defaults’.
According to recent analysis of taxation records by Credit Suisse, Chinese buyers accounted for almost 15% of all new-build property in Melbourne and a quarter of all new homes in Sydney – meaning that the new restrictions are likely to have a major impact on the Australian housing market.
It is therefore perhaps no coincidence that Sydney has reported a 0.7% fall in home prices in November. The news comes as Australia’s housing market is already beginning to slow down. The number of new-builds has fallen to 96,000 this year after having peaked at 116,000 in 2015.
Property purchases by Chinese investors have been blamed for pushing up prices in Australia, pricing many first-time buyers out of the market, so it is likely that the news will be well received by many who feared that some Australian cities were at their peak.