'Chinese demand for real estate waning'

SYDNEY • Chinese demand for Australian property, which has helped propel the price of an average Sydney house to about A$1 million (S$1 million), is waning as an economic slowdown at home dents confidence, according to Credit Suisse Group AG.

Falling auction clearance rates in Sydney and Melbourne, two of the most popular destinations for purchasers from China, suggest there are fewer cashed-up foreign buyers, Credit Suisse analysts Damien Boey and Hasan Tevfik said in a report on Tuesday.

China's surprise currency devaluation in August has dimmed consumer confidence and appetite for overseas property worldwide, they said.

Home values in places such as Sydney, Vancouver and parts of the United States have been surging as Chinese buyers seeking a safe haven for their cash circumvent controls at home to pile into properties abroad.

In Sydney, home values jumped 44 per cent in the three years to September, spurred by record-low interest rates and a stream of buyers from China who were estimated to be snapping up almost a quarter of the city's new homes. 

"Chinese demand seems to have flattened out," the Credit Suisse analysts said, referring to the Australian market. "It is the cyclically poor condition of the Chinese middle- to upper class which is driving the slowdown in property buying abroad."

In recent months, the proportion of home auctions in Sydney that successfully found a purchaser has plummeted to the mid-60 per cent range from more than 90 per cent earlier in the year as buyers baulked at prices and the banking regulator clamped down on mortgage lending.

Most homes in Sydney are sold at auctions.

The waning confidence among Chinese buyers could dim their appetite for global property by 30 per cent this year, said Mr Boey and Mr Tevfik, who are based in Sydney. That is based on the correlation of Chinese consumer confidence with growth in US all-cash home sales, they said.

In California, international buyers are accounting for the smallest share of home sales in at least eight years as prices climb and investors from China rein in purchases, the state's realtors group said last month.

Mr Tevfik said in a report in May that Chinese buyers could more than double their outlay on Australian property to A$60 billion in the six years to 2020.

There is little accurate data on foreign acquisitions of property in Australia, and in the long term, Chinese purchases of homes overseas will "trend upwards", the Credit Suisse analysts said in their latest report.

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A version of this article appeared in the print edition of The Straits Times on November 05, 2015, with the headline ''Chinese demand for real estate waning''. Print Edition | Subscribe