Important new research that has ramifications for home markets all over the world has just established that Chinese buyers are not to blame for high home prices in Sydney, Australia.
Important new research that has ramifications for home markets all over the world has just established that Chinese buyers are not to blame for high home prices in Sydney, Australia.
Two academics from the University of Technology Sydney, Song Shi and Xunpeng Shi, published their paper in the Journal of Housing Studies this month.
They found that in many Sydney suburbs there was no impact on home prices when China cracked down on money leaving the country in 2017. If Chinese buyers had been pushing prices up, then the capital controls crackdown and subsequent decline in the number of Chinese buyers should have allowed prices to fall.
That didn’t happen, except in a few places. Only in locations where Chinese buyers are heavily concentrated did the capital controls affect prices at all. In those areas, they fell 3%.
That means home prices in Chinese suburbs were pushed up an average of $35,000 each by Chinese buyers by the end of 2016.
$35,000 Chinese Buyer Price Increase in Chinese Suburbs
The research shows the impact has smaller and less widespread than many Australians think.
The researchers found that the top 10 Sydney suburbs by Chinese share of population are Haymarket, Carlingford, Chippendale, Zetland, Chatswood, Ultimo, Eastwood, Rhodes, Burwood, and Hurstville.
That list contains no surprises for anyone that knows Sydney.
The Chinese buyer research was conducted in Sydney, but it seems safe to also apply it to the other major world cities. Home prices surged in most of them surged while China's borders were closed in 2021 and 2022. There were very few Chinese buyers, yet prices in many places climbed as quickly as we have ever seen.
People often blame foreign buyers for affordability crises, but the true causes usually lie otherwhere. In Canada, New Zealand and Australia, for example, the true causes for high prices are probably population growth, zoning that drastically limits new supply, and local investors who can outbid first-time buyers.
The Latest Chinese Buyer Trends
According to Juwai IQI’s own data, In the first four months of 2023, Chinese buyers’ top four Australian cities were Melbourne, Sydney, Perth, and Brisbane. About one-third of Chinese buyers look in Victoria, about 30% in New South Wales, and about 20% each in Queensland in Western Australia, with a small percentage heading to the other states.
Chinese home buying in Australia is increasing rapidly now that China’s borders have been reopened. Chinese investment in high-end real estate will climb at least 30% in 2023 compared to 2022.
The Chinese buyer of today is very different than the Chinese buyer of 2019. Before the pandemic, offshore investment buyers accounted for a larger share of Chinese purchases, but no longer.
Most Chinese buyers today purchase for their own use and intend to move to Australia. Many already live here as permanent residents or holders of two passports. That means Chinese buyers today look for larger apartments, townhouses, or single-family homes. They are less likely to purchase a one-bedroom or small two-bedroom inner city apartment.
New research showing that Chinese buyers are not responsible for Sydney’s high home prices is buttressed by studies in Canada that reached similar conclusions in recent years. Even though foreign purchases are now banned in Canada, prices there are nearly at the highest levels ever recorded.
By Juwai IQI Co-Founder and Group Managing Director Daniel Ho
The views expressed in this article are an opinion only and readers should rely on their independent advice in relation to such matters.