A dual-pronged approach from both the Chinese and Australian governments might have finally cooled the red-hot Australian property market.
Chinese investment in Australian properties down by half
While Chinese buyers remain one of the biggest overseas investors in Australian properties, their spending has decreased considerably last year. They invested A$15 billion in residential and commercial properties in 2017, less than half the A$32 billion recorded the year before.
Investors from other countries include Canada which invested A$7.2 billion, the United States with A$6.8 billion, Singapore with A$5.3 billion and Malaysia with A$3.5 billion.
Some states in Australia increased their charges for overseas buyers last year and the Chinese government also put a restriction on the outflow of investment monies. According to the Foreign Investment Review Board, in the 2 years following the implementation of these measures, foreign investment in Australian homes have fallen from A$72 billion to A$25 billion.
Property prices in one of the most expensive cities in Australia, Sydney, have fallen 4.2% last year. But this is following a 70% rise over the previous 5 years. While the prices are still a ways from the record high, the property market is beginning to weaken. In Melbourne, home prices 1.2% in the last quarter.
Bank curbs played a major part in reining in property speculation
In the past few years, some analysts have warned against a possible property bubble that poses a risk to the wider Australian economy. Banks were pressured by the Australian regulatory authorities to tighten lending practice. These new measures included stricter checks on borrowers’ declaration of incomes and assets; and restriction interest-only loans which previously allowed buyers to pay back only the interest within the first few years of a mortgage loan. These moves were particularly effective in dampening foreign speculation of properties in Sydney and Melbourne.
ANZ Bank has said that the current decline in the property market has persisted for longer than expected. They have held back on forecasting future price-rises for this year.