China has had a strong economic growth the last decades, many Chinese investors have gone to Australia to buy properties. Aussie real estate is cheap and also high-yielding for them, China becomes the owner of Australia. The median price for a two-bedroom apartment in Shanghai is $900,000 which is 25 per cent more than the same apartment in Sydney.
The rental yields are very low in Shanghai, they average around 1.5 per cent. On the other hand, rental yields are twice higher in Sydney. ABC reports that based on house-price-to-income ratios, aussie cities are among the most expensive on the planet. Sydney is the second most expensive city in the western world, Melbourne is the sixth.
Sydney house prices have increased 106 per cent in absolute terms since 2009, in Melbourne the prices have increased 89 per cent. Housing demand surpasses supply, the main component of the demand comes from abroad. Chinese investors are the main foreign buyers.
Statistics about the real estate market
Foreigners buy 25 per cent of new houses in NSW and 16 per cent in Victoria. China represents almost 80 per cent of foreign demand. The average transaction by a foreigner in NSW was $1.04 million. US buyers pay on average $2.35 million, Chinese buyers paid the average price. Indians were paying on average $420,000 in Sydney. Chinese demand will remain strong, a report estimated there are 1.6 million US dollar millionaires in China and they are growing fast.
Chinese restrictions on cross border capital flows and an individual quota on foreign exchange movements have had little impact. The thirst of China's new rich for Australian property will ease the pain of the housing market rolling over from its current peak. The severity of the coming housing downturn will be less painful than many think because of wealthy Chinese investors.