I lived in China in 1998 for one year studying with a joint Australian and Chinese university study program. The idea was to help Chinese students improve their English skills, but also offer a stepping stone into gaining entrance into an Australian university. At the time, the yuan was pegged to the US dollar and it was extremely difficult to change yuan to any other currency.
China’s economy was developing at a rapid pace,
but there was still a great deal of poverty. While economic development was largely inevitable, one could never imagine the scale of the growth in prosperity for at least for the middle to upper classes of Chinese society, particularly to the point where they could purchase $24 billion in Australian real estate in one year (2014/15). So what is the attraction of Australia for Chinese investors?
The Australian government and businesses were quick to see the potential of China, especially as trade with Japan started to fall. Austrade for example was quick to set up shop to try and promote Australian products in China. It took some time to realise the difficulties of doing business in China, but those early efforts did help to start the promotion of Australia as a place for travel, education and investment.
It wasn’t so long ago that most Chinese lived in housing provided by their employers. When the market opened up and new developments took off, Chinese rushed to invest in real estate, sparking a property boom. Most property in China however is only available as leasehold and land laws in China can be quite ambiguous. Since Australia’s laws and political environment are very stable, buying property in Australia for Chinese can be more secure than in their own country.
While China’s economic development is unprecedented,
the economy is not without its problems, they have issues with ballooning debt and bubbles in the property and stock market. Many economists are predicting a crash or at least a major correction in the future. Australia on the other hand, (at least compared with China) is generally more stable and predictable.
When Chinese buy property, they invest not just for themselves but for future generations and of course the security for their children. They take a very long term view and Australia’s property growth is fairly consistent over a long period of time and quite attractive compared to other investments. Chinese businesses also prefer to own the land their shops and factories are on, which explains their interest in commercial property in Australia.
While Australia’s property prices have been on the rise, China’s has grown even more rapidly, particularly in the nation’s capital Beijing. So for Chinese, Australian property prices are still good value, especially when you take into consideration that the houses themselves are large by Chinese standards.
Most Chinese are proud of their country, but while they might not talk about it openly, they are aware of the problems with their government and future stability. Purchasing property overseas, is not just an investment, but they may see it as giving security to their family and children. Australia’s education system is well regarded in China. A western education and English speaking ability gives young people a huge advantage in an already extremely competitive country.
Mike Henry works in business development for Performing Agents. A company which helps property sellers to find the top agents in their suburb.