Why Hong Kong and mainland China buyers are acquiring prime Australian property

The surge in home prices comes despite Australia’s central bank this month hiking interest rates by 25 basis points to control inflation that continues to trend higher than the target annual rate of between 2 per cent and 3 per cent. The interest rate now stands at 4.25 per cent, a 12-year high.

However, foreign buyers, including those from Hong Kong and mainland China, have shrugged off the rate increases to pile into Australian property.

Recently, a buyer from Hong Kong paid A$3.8 million (US$2.5 million) for a four-bedroom flat in Sydney, said Peter Li, general manager of Plus Agency, a property agency with more than A$200 million in annual sales.

Another Chinese buyer paid A$3 million for a custom-tailored duplex in a suburb in Sydney, Li said.

Other agents have reported similar upswings in overseas buying sentiment, after the Australian government approved 40 per cent more foreign homebuyers in the third quarter from a year earlier.

Buyers from mainland China, Hong Kong, Taiwan and Vietnam top the list, they said.

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Ken Jacobs, a Sydney-based luxury property agent, said he “negotiated several significant properties for buyers from China and Hong Kong who have recently been granted permanent residency”.

“Foreign buying is surging because of China’s newly opened borders, an increase in foreign students and a steep rise in immigration,” said Juwai IQI’s Ho. “Sales to foreign buyers have increased for four quarters in a row and are now at a five-and-a-half-year high.”

The Chinese are the most active foreign buyers in Australia, and this year they have returned in great numbers, he added.

Australia’s population grew by 2.2 per cent to 26.5 million in the 12 months to March, according to the latest official data. Net overseas migration accounted for more than 80 per cent of the population growth.

Chinese buyers throng Australia in ‘serious mood’ about buying homes

Separately, approved monthly total homes in the country this year have ranged between 12,338 and 15,218 units as of September, lower than the 12,929 and 23,137 units approved monthly from 2019 to 2022.

Given the limited number of approved new residential units as well as the rising demand for homes including those from overseas buyers, prices are likely to remain firm in the coming year, property agents said.

“The main reason is the shortage of quality houses coming onto the market, which is not matching demand,” Jacobs said. “Mainland Chinese and Hong Kong buyers are significant, but there is also increasing interest from US and European buyers.”

Demand and transactions have increased, according to Plus Agency’s Li.

“We see many more foreign buyer inquiries, and transactions are up, too, but not in proportion to inquiries,” Li said. “Foreign buyer inquiries are up about 400 per cent compared with last year, while transactions are up about 20 per cent.

Meanwhile, home price trends in Australia next year will hinge on supply, which is expected to remain below demand, and interest rates, said Juwai IQI’s Ho.

“Most analysts think prices will rise by up to 5 per cent in 2024, but one well-respected forecaster predicts a drop of up to 4 per cent,” said Ho.

“It will be a battle of attrition between interest rates on the one hand and a housing shortage on the other. Will interest rates eventually be able to force price falls? We’ll find out next year.”