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- Sep 30 2015 at 7:30 PM
- Updated Sep 30 2015 at 7:58 PM
Buying is cheaper than renting in Sydney and Melbourne
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/h/v/g/f/h/image.related.afrArticleLead.620x350.gjy63n.png/1443607135755.jpg[/img]President of the Real Estate Institute of NSW, Malcolm Gunning, says "there's an old saying that you can rent a better property than the one you own".
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by Su-Lin Tan
Renting might seem more appealing with soaring housing prices in Sydney and Melbourne but don't expect it to be cheaper than buying.
While investors have boosted the supply of rental accommodation and reduced the rate of growth of rents, rents are still growing in the two major cities, Housing Industry Association senior economist, Shane Garrett said.
"At the moment, it is cheaper to buy a home than to rent," he said.
"Between 2008 and 2010 the rental growth rate was strong but it has declined. The role of the investor has taken the heat off renting.
"But rental prices are still growing in the two cities."
The historical low cash rate of 2 per cent is the reason for this phenomenon.
"When interest eventually rises, that's when it will change the dynamics between renting and buying," Mr Garrett said.
"But interest rates are likely to fall again at the end of the year, and its likelihood of going up in 2016 is low. It fact it won't go up until 2017 at the earliest."
COUNCIL COSTS
Real Estate Institute of NSW president Malcolm Gunning said in many cases, "mortgage repayments are cheaper than rental".
"Take for example a one-bedroom in inner city Sydney which costs about $700,000. At about a 4 per cent fixed mortgage rate, you pay about $580 a week," he said.
"But rents in these areas are about $650 to $700."
Other costs need to be taken into account for owning property such as strata and council costs, but on face value, renters are worse off than buyers at present.
"There's an old saying that you can rent a better property than the one you own," Mr Gunning said.
But even when interest rates fall, renters are not ahead either.
"When interest rates increase rents tend to go up as well as investors try to recover interest rates. It has a knock on effect," Mr Garrett said.
"If interest rates go up, the only way rental will not go up is when there is no demand."
Many favour renting over buying because they can invest their money into the sharemarket which can generate better returns than the property market.
But the rental environment in Australia which does not support stable long-term leases makes renting less attractive.
"In Europe for example more people rent because it is more strongly regulated. But what will tend to happen is that the European landlord will factor in higher rents in longer lease terms and build in a higher risk premium."
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Australia can't afford to burst housing bubble as wave of Chinese money looms
DateOctober 1, 2015 - 4:55PM
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Rose Powell
Journalist
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Experts say any political or financial issues in China could trigger a huge wave of foreign buyers into Australia's property market. Photo: Simon Bosch
Property rises might be taking a breather after a year of superheated growth, but one investment banker has bad news for most aspiring home owners: Australian house prices will keep getting higher and the government will do nothing to prick the bubble because the country simply can't afford it.
And any hint of instability in China could send a wave of new money into the Australian market, says Saxo Capital Asia macro strategist Kay Van-Petersen.
Kay Van-Petersen Wrote:There is a lot of talk about Chinese money, but you guys haven't seen anything yet.
Houses and apartments in Australia, particularly Sydney and Melbourne, have never been more expensive. The median house price in Sydney hit $1 million in July, said the Domain House Price Report, and investment bank Goldman Sachs estimates the markets in Sydney and Melbourne are almost 20 per cent overvalued.
House prices are on track to rise by a whopping 9.8 per cent this year, say numbers released this week by the Australian Bureau of Statistics, which showed national price growth was 4.7 per cent between the March and June quarters.
Morgan Stanley has said the prices have peaked, but Mr Van-Petersen says they will continue to grind upwards and the government is unlikely to do anything about it.
"The government has to try and talk it down and say it's inflated, but at the same time all they can try and do is control the ongoing growth as best they can," Mr Van-Petersen said. "If they wanted to prick it, they could, but Australia simply cannot afford to."
New Zealand and Singapore have enacted strong policies to force adjustments in housing markets and Mr Van-Petersen said Australia could easily deflate the bubble by pulling the stamp duty tax charged to foreign buyers from properties of more than $15 million to, say, $1.5 million.
But the property market is one of the few areas of the economy that is growing adequately as terms of trade plummet and mining companies shed value because commodity prices are falling in light of a slowing China.
"Australia can't afford for property to have a hard landing. If housing prices bust, the banks will get hit hard. And then what is there? It's in everyone's interests right now."
IMF weighs in
Even the International Monetary Fund is talking about Australia's favourite conversation topic: property prices and whether the country is in a bubble.
In the IMF's latest report on the Australian economy, it raised the increasingly likely potential of a housing price correction, and called for greater investment in infrastructure to "relieve bottle necks and housing supply constraints".
"Buoyant housing investor lending has recently prompted regulatory action to reinforce sound residential mortgage lending practices," its report said.
In a similar finding to that of the Australian Prudential Regulation Authority, the report said the big banks' strength and profitability would need more support if a severe adverse scenario occurred, such as a housing bubble collapse.
"To address risks in the housing market, directors supported targeted action by the regulator. They cautioned that if investor lending and house price inflation do not slow appreciably, these policies may need to be intensified."
Even if more houses and apartments are made available for purchase, Mr Van-Petersen warned any political or financial issues in China could trigger a huge wave of foreign buyers into the property market.
He said: "There is a lot of talk about Chinese money, but you guys haven't seen anything yet. Any wobble in China, whether it's political or a financial markets issue, will see serious money flooding out here and, so far, Australia's got no idea of what that looks like."
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Melbourne takes Sydney's house price lead
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by Su-Lin Tan
Melbourne's property market took the lead in September, posting a 2.4 per cent rise in prices, as the Sydney market stalled, CoreLogic RP Data finds.
Sydney housing prices hardly moved, rising 0.1 per cent over the month, down from 1.1 per cent while Melbourne grew at 2.4 per cent, up from zero in August.
ANZ Research however said Melbourne's performance will be short-lived with "price growth to ease over coming months".
The Brisbane market was a surprise performer rising 1.4 per cent over the month, up from no growth in August.
[img=620x0]http://www.afr.com/content/dam/images/g/j/r/f/5/i/image.related.afrArticleLead.620x350.gjynx8.png/1443659057370.jpg[/img]"Fatigue has set in. For Sydney, back in 2001 the market rose for three years and three months then slowed. We are at that point now with Sydney," Corelogic RP Data's senior research analyst, Cameron Kusher said. Erin Jonasson
"Fatigue has set in. For Sydney, back in 2001 the market rose for three years and three months then slowed. We are at that point now with Sydney," CoreLogic RP Data's senior research analyst, Cameron Kusher said.
"Also some of the push to slow down investor lending is working its way in."
Across the country, capital city dwelling values rose 0.9 per cent rise in September and 4 per cent lower than the September quarter.
The results mirrored auction clearance rates in the major cities. Both Sydney and Melbourne have cooled to clearance rates in the 70s in recent weeks.
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Mr Kusher said despite the flat conditions in dwelling prices, the market is strong with supply just meeting demand.
"The rest of spring will be a bit patchy though," he said.
BRISBANE SURPRISES
Strong investor interest and a net growth in population in Brisbane is fuelling some of the rise in dwelling prices for the city.
Over the quarter, Brisbane grew 1.9 per cent and 4.6 per cent for the last 12 months.
While half of Australia's capital cities have seen values rise over the past quarter and year, the other half did not fare as well.
In Darwin, dwelling values fell by 3.9 per cent over the 12 months to the end of September, while in Perth, values were 0.9 per cent lower over the year.
Adelaide home values dropped by 0.3 per cent, and Hobart values are 0.2 per cent lower.
"Weakening labour markets, slower population growth and less demand for housing is placing downwards pressure on prices to differing degrees across these markets," CoreLogic's head of research, Tim Lawless said.
YIELDS STILL LOW
While house prices are cooling, rental yields across the cities remained compressed.
The lowest gross rental yields can be found in Melbourne where the typical house is now providing a gross return of just 2.9 per cent, and units are providing a gross return of 4.1 per cent, CoreLogic said.
In Sydney, gross yields are also at a record low with houses providing a gross return of 3.1 per cent and units yielding 4.1 per cent.
"With the first month of spring behind us, it is clear that housing market conditions are being tested, particularly in Sydney," Mr Lawless said.
It is still better to buy than rent in some parts of Sydney.
Property valuer Propell tipped Sydney and Melbourne house prices would slow to 5 per cent growth.
"Overall, the data are consistent with our view that the housing market is beginning to soften," ANZ Research said in a note.
Morgan Stanley concurs with this view while investment bank Goldman Sachs estimates the markets in Sydney and Melbourne are almost 20 per cent overvalued at the this peak position.
However, Saxo Capital Asia macro strategist Kay Van-Petersen has put a dampener on this saying house prices will keep getting higher and the government will do nothing to prick the "bubble" because the country simply can't afford it.
"The government has to try and talk it down and say it's inflated, but at the same time all they can try and do is control the ongoing growth as best they can," Mr Van-Petersen said.
"Australia can't afford for property to have a hard landing. If housing prices bust, the banks will get hit hard. And then what is there? It's in everyone's interests right now."
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Sydney and Melbourne markets revive values of coastal property
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/j/o/2/q/q/image.related.afrArticleLead.620x350.gjztmn.png/1443770789485.jpg[/img]The Noosa property market is almost back to pre financial crisis levels. Matt Harvey
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by Su-Lin Tan
Property agents and developers are seeing a revival in the coastal property markets as tailwinds from the strong Sydney and Melbourne property markets blow off the cobwebs left by the global financial crisis.
The improving conditions have not reached the Whitsunday and Mackay markets, however.
"The market's moving along nicely," said David Conolly of Century 21 Conolly Hay Noosa Heads. "We're not back to pre-GFC levels but it's close."
INVESTMENT ACTIVITY
"The sub $1 million to $2 million houses are selling well. We are seeing a fair bit of Sydney and Melbourne investment activity moving here. Also empty nesters."
"It has been building strongly in the last 12 months."
But for big city holidaymakers travelling along the coast this long October weekend auctions may still cough up mixed results.
"There's a lot of people up here at the moment but stock levels in Noosa are low," Richardson & Wrench Noosa's Frank Milat said.
"We've run out of the gentleman sellers who expect a fair price."
Vendors' unrealistic expectations are affecting auction clearance rates.
SAFE HAVEN
Aside from interstate interests, superannuation funds are sniffing around the coast for "safe haven assets" which benefit from low rental vacancies, Mr Milat said.
Sale of houses in Noosa have risen 38 per cent to June 2015 from 2009 and units have climbed 59 per cent, according to Corelogic RP Data.
BYRON BUOYED
In Byron Bay, house buyers are picking up over 50 per cent more houses and units in 2015 than in 2009.
"Right now we've got more money than I've seen in 25 years," Bryon Bay Property Sales' Graham Dunn said.
"I'm not worried about boom territory because there's demand from [retirees] who want four months in Byron Bay, four in Melbourne and the rest in Europe."
Byron Bay locals have voiced their concern their property market is temporarily buoyed by interstate investors but Mr Dunn disagrees.
"We've had a Green council since 1998 and there's been no land releases...in the absence of another GFC, demand will be continuous."
But leading valuer Herron Todd White warned their revival could be propped up by "some buyers who are unsophisticated and see the coast as 'cheap'." In Byron Bay, the surge in buying activity has caused "volatility".
"This is evidenced by 74 Paterson Street which was purchased in June 2012 for $1.25 million with a previous sale of $2.2 million in 2009 and $2.5 million in February 2015," the valuer said in a report.
ROCK BOTTOM
The Whitsunday and Mackay are still weak. After copping a blow from the GFC, the two areas were hit by the slowing mining sector.
"We've definitely hit rock bottom though," LJ Hooker Whitsunday's Jess Hunter said.
"Prices are still the same as 2006-7 with owners who sell now taking losses. We are hoping in one to three years the market would've turned. Now's a good time to buy."
Developers have a positive view of the coastal revival.
Millionaire Bob Rose's Rose Property Group has sold nearly 50 per cent of its 385-hectare site at Catherine Hill Bay in the NSW Central Coast.
While sales were explosive as expected, Rose Property's managing director, Bryan Rose said the coast has "fully recovered".
The group is looking for new coastal sites.
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Apartment default risk rising, but threat low: Analysts
Samantha Hutchinson
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Property Writer
Ben Wilmot
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Commercial Property Editor
Sydney
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Morgan Stanley analysts say that up to 60 per cent of Lend Lease apartment sales are at high risk of default.Source: Supplied
[b]The risk of buyers not settling their apartment purchases is rising, but analysts remain sanguine about the threat posed to Australia’s largest developers arguing stocks have been oversold.[/b]
In a detailed note from Morgan Stanley, analysts found that at worst, up to 60 per cent of Lend Lease’s apartment sales were at high risk of default, but they deny it poses a real threat to the group’s earnings.
Despite banks clamping down on investor loans and China tightening controls on outbound capital, Morgan Stanley analysts argue Lend Lease’s shares have been marked down too much with deposits on-hand providing an adequate buffer if settlements fall through.
“While we acknowledge that settlement risks are increasing, we believe that the levels of apartment defaults and apartment price falls implied by today’s share price suggest that Lend Lease has been heavily oversold,” Morgan Stanley analyst Jonathan Lee said.
At the end of two years of strong house price growth and off-the-plan apartment sales, analysts are bracing themselves for higher settlement risk, as a tighter lending environment internationally dampens the capacity of new apartment buyers to stump up on sales settling in the coming months.
The risk is expected to extend to all major apartment developers with a high number of settlements due in coming months, but the analysts have downplayed the potential impact on share prices, given that many residential stocks are trading with the likelihood of a default priced in.
“We believe the derating has been driven by the market concerns of an increase in market default rates, due firstly to a potential shrinking pool of funds available for investors as major banks try to limit investor loan growth … and a tightening of capital controls for funds trying to exit mainland China,” Mr Lee said.
The analysts have calculated that more than 21 per cent of Lend Lease’s earnings before tax in the next four years will come from apartment sales, of which investors make up 30 per cent, and offshore buyers about 75 per cent of this.
“This suggests that up to 60 per cent of all Lend Lease’s apartment sales could be considered as high-risk sales, which could in turn put close to $638m of apartment profits over the next four years at risk,” Mr Lee said.
But the likelihood of this eventuating is small, and the developer can still grow earnings even if the default rate climbs to 100 per cent.
“Assuming all buyers default and the apartments are sold for the original sale, Lend Lease’s margins would actually increase by the deposit price less agency fees,” the analyst said.
Further calculations show that the group could meet targeted margins on apartments of 15 to 20 per cent profit even if all the buyers default and all the apartments are sold for 10 per cent less than their original sale price.
“Lend Lease’s current share price implies that 80 per cent of all apartments sold default and apartments are resold at 30 per cent discount to their original price,” Mr Lee said.
Lend Lease argued the group had taken active steps to minimise the impact of default if a significant shock was likely to affect buyers’ capacity to settle.
“Historically, settlement risk has been low for Lend Lease’s apartments business. We closely monitor project performance, and we look at our level of pre-sales and explore avenues to de-risk where appropriate,” a spokesman said. We are expected to settle a number of apartments in Brisbane, Sydney and Melbourne in coming months and settlement risk remains low.”
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Builders bring brickies from overseas to plug gaps
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/k/0/z/5/1/image.related.afrArticleLead.620x350.gk0z1j.png/1443996717177.jpg[/img]Francesco Caronna, an Italian bricklayer working for Favetti Group in Sydney. Supplied
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by Michael Bleby
Ray Favetti already employs two bricklayers on 457 visas and is processing an application for a third. The executive director of Ingleburn, NSW-based Favetti Group, a contract bricklaying company, can't find enough local bricklayers to meet the current demand.
Demand is so strong right now that Mr Favetti - whose workers built the Frank Gehry-designed Dr Chau Chak Wing building at University of Technology, Sydney - could double his current staff complement of 65.
But the local failure to produce enough brickies that led Mr Favetti to employ Italian national Francesco Caronna stems from the problem that not enough young people want to train in the trade. The 53-year-old Mr Favetti acknowledges he is part of the problem.
"I tell my daughters to go to uni," he says. "I don't tell them to go and find a trade. It's a lot of the modern parents telling their children stay away from being a trade."
Favetti Group is not unique. Newcastle-based McDonald Jones Homes, which jumped into the ranks of the country's top 20 home builders this year, is also importing bricklayers from the UK and Ireland.
"We've got 3 to 4 gangs operating in Sydney at the moment," says marketing manager Nathan Thurston. "They're quite efficient and the quality of their workmanship is of a high standard."
Even with Australia's biggest-ever housing construction boom levelling off, activity levels are likely to remain elevated, especially in Sydney, which still faces a chronic undersupply of residential property. Policy makers and employers alike are grappling with how to overcome acute shortages in what remains a very cyclical industry.
Bricklaying prices have soared in the city as the housing boom has taken hold. In 2012, the cost was about $900 for 1000 bricks, as it is in Melbourne and Brisbane today. Now in Sydney, the figure is more than $1500 for 1000 and heading towards $2000.
"The industry's recovered faster than you can train them," says building-products maker Brickworks's managing director Lindsay Partridge. "We'd much rather be training Australian kids or recent immigrants rather than bringing them in."
Training is taking place.
"I would say we've trained 900 new tradespeople since 2004 and I would put it to our competitors in the top ten [of housebuilders] that the aggregate of their apprentices wouldn't come up to half of what we've got in total," says ABN Group managing director Dale Alcock.
But in the current boom there are just not enough.
"You get the sense we haven't learnt from the past," says Master Builders Australia chief executive Wilhelm Harnisch. "Every time there is a cyclical upturn we seem to have a shortage and maybe that's just the nature of the industry. We're very much a boom and bust industry."
It costs more to import a bricklayer - about an extra $100 a week for a worker like Mr Caronna - Mr Favetti says. His three 457 employees, who were in Australia he sponsored for a visa, have cost him between $4000 and $6000 each. If he imported them from overseas, which he has looked into doing, it could cost up to $10,000 per person, he says.
"I'm happy to pay the fees," Mr Favetti says. "It's like me investing. It will keep me winning contracts and hopefully make the business survive."
But while importing labour is a short-term fix, the MBA is concerned that measures such as the China-Australia Free Trade Agreement - do not let unskilled workers in. Mr Harnisch says he thinks there are sufficient safeguards in place.
Mr Favetti thinks it should be easier to import skilled workers, but also on the proviso that it didn't bring in unskilled labour. The slow economies of countries such as Italy and Spain offer a good supply and they're worth the extra cost, he says.
"They're fresh, they're eager," Mr Favetti says. "They're hungry. You get your money back easy."
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Stockland chief Mark Steinert says lending changes have pricked housing bubble
Turi Condon
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Property Editor
Sydney
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Source: TheAustralian
[b]The threat of a housing bubble stoked by an oversupply of apartments has receded as the big banks heavily rein in lending to developers, according to Mark Steinert, chief executive of Stockland, the nation’s biggest residential developer.[/b]
The banking regulator’s requirement that investor home loan growth be kept below 10 per cent a year had seen financing dry up for mid-tier developers and projects begin to stall, Mr Steinert said.
“A lot of the supply that potentially could cause a problem is not going to be built this cycle because developers won’t get the funding,” he told The Australian.
Last week HSBC quietly cut loans to buy investment property for new customers, while AMP has scrapped lending to landlords and other major banks have raised investor mortgage rates as the banks move to comply with the Australian Prudential Regulation Authorities guidelines.
In the last two months, Stockland — which will develop 32,700 dwellings and lots in the next two years — has seen partly built or stalled apartment projects become available to buy.
Mr Steinert, who before taking the role at Stockland in 2013 headed global research for UBS in New York, argues that there will be no housing bubble, and “definitely no recession”. He said: “Our outlook for Australia is benign. We operate in every market in the country and they are all showing some level of growth, so I don’t see what would create this recession in Australia without some external shock.”
China was one wildcard, though economic growth there was still expected to be 5-6 per cent, he said. Another was population growth. “If there was a collapse in migration, that would cause a challenge. This is what underpins the economy,” he said.
The surge in Sydney and Melbourne’s house prices had created some hysteria and a skewed view of the national housing scene, he said. “People don’t seem to comprehend, this has not been a particularly strong cycle — outside of Sydney and Melbourne — in the context of the last 30 years.
“In most (other) markets, price growth has been 3-4 per cent (a year) — that’s about the same as inflation and population growth.”
Residential researcher CoreLogic RP Data found that Sydney’s house prices increased nearly 17 per cent in the year to September while those in Melbourne rose 14 per cent.
Underpinning the housing market and aiding economic growth was the current round of infrastructure development, particularly heavy rail projects, Mr Steinert said.
“What we (developers) are benefiting from is not the hot market, we are benefiting from true transport corridors in Australia for the first time in 40-50 years,” he said.
He pointed to Melbourne’s new western rail link, the new north eastern rail in Brisbane, and in Sydney the new rail planned for the northwest and southwest, along with new rail lines also due for Perth.
“The penny has finally dropped that heavy rail is a killer app,” Mr Steinert said. “People can jump on and know they can get to work pretty much every day at the same time. That has been the missing link for Australia.”
While no sector of the economy accounted for more than 11 per cent of Australia’s GDP, those that were on the growth path were financial services — off the back of the world’s third-largest superannuation pool, construction underpinned by new housing and infrastructure, professional services and education, Mr Steinert said.
“The silver lining from the mining industry slowdown is that the lease rates on heavy equipment, operator wages and diesel have dropped,” he said.
“For our civil works those are 70 per cent of our costs of goods sold.”
But Mr Steinert, who is also president of peak property industry body the Property Council of Australia, sounded a note of caution on some apartment sectors, saying the nature of high-rise towers with many apartments meant that oversupply could happen more quickly, as was likely to be the case in inner Melbourne.
Despite this, he did not rule out Stockland undertaking high-rise apartment development in the future.
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http://www.valuebuddies.com/thread-3051-...#pid120569
Always a refreshing read from AV Jennings view on Aussie prop mkt...
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Says who that our comrades can't afford and can't buy?
Feng shui and a Bentley: how to drive a Golden Week bargain
Samantha Hutchinson
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Property Writer
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Property agents Michael and Lulu Pallier with the Bentley coupe they recently bought to ferry Chinese buyers around Sydney’s luxury suburbs. Picture: James Croucher Source: News Corp Australia
[b]In China, the Golden Week holiday heralds mass relaxation. Here, for the same shining reasons, the reverse is true: luxury property agents across the country are frantic, playing host to scores of Chinese executives tempted by high-end real estate.[/b]
Sydney Sotheby’s agent Michael Pallier knows all about it. He could sell up to $100 million of property on the back of the seven-day Golden Week, but knows that wealthy Chinese require special treatment.
There’s some serious entertaining, multiple trips around the harbour — and the tooling about the place in the new Bentley. Bentley? Pallier, who has been party to some recent mega-deals, including the sale of James and Erica Packer’s former home in Vaucluse, has spent close to $200,000 on a Bentley coupe to ferry clients to inspections.
He hasn’t clocked off before midnight this week as he and his wife Lulu cram in viewings for visiting Chinese buyers who are using the holiday to unwind — both their time and cash. The Palliers are spending plenty of time in and around Sydney’s exclusive Point Piper.
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“Our buyers are still looking for homes which have a feng shui aspect, and often that means having a hill behind it and water at the front,” he said. “Which is what makes Point Piper so appealing.”
Other agents are experiencing similar manic conditions. Black Diamondz agent Monika Tu has been opening up to seven homes a day for inspections and co-ordinating a packed entertainment schedule aimed at putting deep-pocketed Chinese buyers in touch with luxury car, watch and clothing brands, as well as property.
Golden weeks, which happen twice a year, have been busy for several years. But the recent fall in the value of the Australian dollar has pushed Chinese interest and demand into overdrive. A 10 per cent slide in the currency since May has made Australian property more affordable for overseas buyers.
Other events, including the recent rout on the Shanghai sharemarket, have heightened Australian real estate’s appeal as a safe-haven investment for Chinese who wish to invest here by qualifying for permanent residency via the premium investment visa class in exchange for a $5m or $15m investment in government bonds and other non-property assets.
The property sector in past months has been outed as a hotbed for spurious foreign transactions, triggering a string of high-profile property seizures as part of a campaign led by former treasurer Joe Hockey. The campaign forced Chinese billionaire Xu Jiayin to divest $40m Point Piper mansion Villa del Mare.
The crackdown has boosted compliance among foreign buyers, according to property executives.
Tu, who could sell up to $50m worth of homes from work undertaken this week, said Australia’s appeal was on the rise.
“They (Chinese) know it’s looking better to buy so they want more of an introduction to the country,” she says. “They think they like the way of life here, and we want to show them the lifestyle and the community.”
The holiday period, which started on October 1 and ended on Wednesday night, is known throughout the region for triggering a vast amount of Chinese tourism. Frederic Neumann, co-head of Asian economic research for HSBC, says the Golden Week period “matters hugely for destination economies, driving the sale of airline tickets, hotel stays and, presumably, plenty of selfie-sticks”.
The number of Chinese tourists in Southeast Asia will climb from 116 million last year to more than 242 million by 2024, he predicts.
Chinese families often arrive at inspections with in-laws and extended families in tow. Pallier has been showing off trophy waterfront listings in Vaucluse, Rose Bay, Double Bay and, of course, Point Piper, where properties include 110 Wolseley Road.
The four-bedroom home, once owned by News Corp’s executive co-chairman Lachlan Murdoch and his wife Sarah, has arguably the city’s best vista and is valued at more than $37m.
Other agents say they have noticed a subtle change in offshore buyers’ tastes. Buyers who once favoured ultra-modern, cubist designs are increasingly attracted to older homes, including Federation-style or sandstone mansions with period features.
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- Oct 11 2015 at 4:58 PM
- Updated Oct 11 2015 at 4:58 PM
Ignoring the year of the Monkey is good news for Australia
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/k/6/e/2/2/image.related.afrArticleLead.620x350.gk2sw8.png/1444543106870.jpg[/img]The last Year of the Monkey celebrations in Sydney in 2004. The 2016 year will not be so good for business.Steven Siewert
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by Su-Lin Tan
Rumour has it that Chinese developers may be looking to slow down in 2016, the Chinese year of the Monkey, which has been forecast as a bad year for business.
"It's not just the year of the monkey, but also the 'fire' monkey. 2016 will be more unstable," Sydney feng shui consultant, Mina Zheng said.
"The monkey is a naughty, prankish and unpredictable animal. Further the monkey is a 'metal' element and this clashes with fire. The year of the monkey at the start of February will herald a problematic year."
Fortunately, large Chinese developers like Country Garden, which is building 800 apartments in Sydney's north, Hong Kong-based Golden Horse Group and Melbourne developer AXF Group are ignoring astrological predictions.
"We are not into that," AXF's managing director Richard Gu said.
Chinese investments, which are expected to grow to $US90 billion ($123 billion) in the next decade, are critical to Australia. Any retreat of Chinese money, whether from the devaluation of the renminbi or a clampdown on capital outflow, could hurt Australia.
"We are a current account deficit country, and in June there was a sharp deterioration in this deficit. If a large chunk of foreign investment, including Chinese money, dries up, the Australian dollar will fall even more," AMP Capital chief economist Shane Oliver said.
"Ronald Reagan was once criticised for having a deficit and he said 'at least we are still growing'. Foreign money is a good barometer for Australia's progress, that we are still attractive."
Credit Suisse analyst Hasan Tevfik has allayed fears about Chinese investments slowing.
"Just looking at the foreign exchange reserves there are still massive outflows from Chinese institutional companies and individuals. In fact the outflows have increased significantly since the renminbi devaluation [in August]," he said.
"We see a further devaluation from here. This will bring forward more demand for Australia. The locals are thinking, they need to get out now. A capital control can try and stop it but it's not going to stop it completely."
AN ISSUE OF CURRENCY
Beijing's desire for the renminbi to be seen as an international currency would keep a extended capital outflow clampdown at bay, Mr Hasan said.
"In a fixed currency regime, for every renminbi leaving China, Beijing has to sell its reserves to top up the currency to keep it stable, hence the clampdown," he added.
"But it cannot keep doing this because to have a currency recognised, it needs freer capital flows."
Capital controls aside, Mr Hasan said interest in Australia will not wane for two reasons: immigration and Australia's attractiveness compared with other countries.
"Draconian tax laws in Hong Kong and Singapore mean Australia properties are more attractive.
"And unlike the Japanese in the 80s, Chinese investments are consistent with immigration. So capital inflows will be sustained longer."
Overseas experts also believe Chinese investment flow into Australia will not diminish.
"Chinese money is still, and will continue, going into Australia. The volatility and uncertainty in China will continue into next year, further increasing the attractiveness of Australian property," Hong Kong-based APT Capital management strategist Amy Reynolds said.
Demand for education by Asian overseas students will also rise in 2016 pushing up more capital flow into Australia, the University of Sydney Business School's Hans Hendrischke said.
Residential architect a+ design's Tony Leung is banking on this for more demand in housing.
"Overseas students can only bring 20 kilograms and they need to buy and build everything else here; this impacts the Australian economy," he said.
But Dr Oliver warned Australia not to be complacent.
"If something goes terribly wrong in China, developers may repatriate their capital back to support businesses there. A recession here could also be a short-term deterrent to Chinese capital."
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