I thought it worthwhile referring you all to this site www.basispoint.com.au as it covers very well what’s likely to occur with a crackdown in China on property investing overseas, an excerpt from David Chin follows
“China’s release of a formal list of ‘banned’, ‘restricted’ or ‘encouraged’ overseas investments is a game changer for Australia’s property industry.
Overseas property (commercial, residential developments, hotels, theme parks) is now restricted (though not banned).
Chinese investors/developers can expect tougher government assessments that their deals are not ‘irrational’ and are within their ‘core’ business.
The result is increased uncertainty with the following consequences for property developers.
- Demand/supply balance for deals now favours a reduced buyer pool. Buyers will ‘wait and see’ to flush out distressed sales and/or negotiate harder.
- Property assets currently earmarked to be ‘flipped’ by speculative owners will become distressed sales if owners have limited funding sources/holding capacity.
- Plans by Chinese owners to roll their commercial properties into REITs (real estate investment trusts, hotel investment funds etc – another form of ‘flipping’?) for sale to other Chinese investors will want clarity on whether ‘equity investment funds’ now identified on the ‘restricted list’ will be a problem.
- But Chinese/Australian developers here for the long-term will benefit as speculative offshore developers will exit, leading to lower site costs, reduced construction activity and less supply of apartments.
However Chinese overseas individual investors into Australia are also facing headwinds. They include:
- 17% in combined transaction, interest rate and levy costs (on a $1m deal – a break-down of this 17% will be released ahead of my 20 Nov property event) acting as a major deterrent for new offshore buyers.
- Difficulty in getting Australian bank financing for settlement, but a number of non-bank lenders have stepped into this market in recent months. Mirvac and Lendlease recently announced settlement failures are still under 2%…but one should ask them how many settlements have been delayed past 30 June 2017. AV Jennings reported 5% of settlements were delayed.”