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Chinese property investment in Australia ‘hasn’t stopped’

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Chinese investment will continue to flow into Australia’s housing market despite tighter mainland capital restrictions, with real estate portal Juwai predicting levels will peak again despite a near-10 per cent fall in inquiries earlier this year.

Inquiries on the website for Australian property from potential Chinese buyers have fallen 9.7 per cent in the first half of this year compared with the first six months of 2016, according to a Juwai.com spokesman.

“It’s down on last year, but it’s still going to be the second or third biggest year (for inquiries),” the spokesman said.

“It’s like going through the foothills — there are more peaks ahead.”

The comments come as Bloomberg reported that capital restrictions on money flowing out of the country had not stemmed Chinese interest in offshore investment. It quoted a Shanghai restaurateur saying he planned to carry money to Melbourne in a suitcase so he could buy a local investment property.

Shanghai restaurateur David Hu said he was nervous about wiring money to Australia for a home purchase because of China’s crackdown on currency outflows, Bloomberg reported.

The 61-year-old told the news agency that he intended to carry about $85,000 to Melbourne this month in a suitcase. The money was final payment for a deal struck last year.

“Buying a property abroad was and is still workable,” said Hu, though he described the process as a “lot more troublesome” these days.

Chinese applying for $50,000-a-year foreign exchange quotas must sign pledges that the money won’t be used for real estate. The regulation was brought earlier this year.

Major Chinese companies that have expanded rapidly offshore have come under pressure after a recent edict from Beijing to rein in debt.

Wanda, which is developing landmark apartment and hotel towers in Sydney and on the Gold Coast, has been shuffling its assets, last week announcing the sale price for one arm of the group.

It also saw a downgrade from global ratings agency S&P for two of its entities.

Meanwhile, investment bank UBS last week released a report adding Sydney to a list of global cities at risk of a housing bubble.

The bank warned of “elevated risk” in the city’s overheated housing market, singling out foreign investment as one of the factors fuelling price growth.

Australian regulators have been clamping down on investor and interest-only lending to take some heat out of the east coast capital property markets.

“Sydney’s housing market has been overheating since the city became a target for Chinese investors several years ago,” UBS said.

“Low interest rates, rising wealth and exuberant expectations also buoyed local demand. So valuations soared and pushed the market into bubble risk zone.”

A dip in prices in 2015-16 was short-lived, and real prices rose 12 per cent over the last four quarters to be 60 per cent higher than in 2012, UBS said.

Meanwhile, incomes rose by a “meagre” 2 per cent in inflation-adjusted terms, while tax breaks and interest-only loans were “whitewashing the worsening affordability for the time being”.

Around the world, bubble risk appeared greatest in Toronto, while Stockholm, Munich, Vancouver, London, Hong Kong and Amsterdam were also at risk.

Originally Published: www.theaustralian.com.au

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Opinion

Negative gearing changes will affect us all, mostly for the better

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Negative gearing changes will affect us all, mostly for the better

Don’t have a negatively geared investment property? You’re in good company.

Despite all the talk about negatively geared nurses and property baron police officers, 90 per cent of taxpayers do not use it.

But federal Labor’s policy will still affect you through changes in the housing market and the budget. Here’s what you should know.

Labor’s negative gearing policy will prevent investors from writing off the losses from their property investments against the tax they pay on their wages. This will affect investors buying properties where the rent isn’t enough to cover the cost of operating the property, including any interest payments on the investment loan.

Doesn’t sound like a good investment? Exactly right: negatively gearing a property only makes sense as an investment strategy if you expect that the house will rise significantly in value so you’ll make a decent capital gain when you sell.

The negatively geared investor gets a good deal on tax – they write off their losses in full as they occur but they are only taxed on 50 per cent of their gains when they sell.

Labor’s policy makes the tax deal a little less sweet – losses can only be written off against other investment income, including the proceeds from the property when it is sold. And investors will pay tax on 75 per cent of their gains, at their marginal tax rate.

Future property speculators are unlikely to be popping the champagne corks for Labor’s plan. But other Australians should know that there are a lot of potential upsides from winding back these concessions.

Limiting negative gearing and reducing the capital gains tax discount will substantially boost the budget bottom line. The independent Parliamentary Budget Office estimates Labor’s policy will raise about $32.1 billion over a decade.

Ultimately, the winners from the change are the 89 per cent of nurses, 87 per cent of teachers and all the other hard-working taxpayers who don’t negatively gear. Winding back tax concessions that do not have a strong economic justification means the government can reduce other taxes, provide more services or improve the budget bottom line.

Labor’s plan will reduce house prices, a little. By reducing investor tax breaks, it will reduce investor demand for existing houses.

Assuming the value of the $6.6 trillion property market falls by the entire value of the future stream of tax benefits, there would be price falls in the range of 1 per cent to 2 per cent. Any reduction in competition from investors is a win for first home buyers.

Existing home-owners may be less pleased, especially in light of recent price falls in Sydney and Melbourne. But if they bought their house more than a couple of years ago, chances are they are still comfortably ahead.

And renters need not fear Labor’s policy. Fewer investors does mean fewer rental properties, but those properties don’t disappear – home buyers move in, and so there are also fewer renters.

Negative gearing would affect rents only if it reduced new housing supply. Any effects will be small: around 90 per cent of investment lending is for existing housing, and Labor’s policy leaves in place negative gearing tax write-offs for new homes.

All Australians will benefit from greater stability in the housing market from the proposed change. The existing tax breaks magnify volatility. Negative gearing is most attractive as a tax minimisation strategy when asset prices are rising strongly. So in boom times it feeds investor demand for housing. The opposite is true when prices are stable or falling.

The Reserve Bank, the Productivity Commission and the Murray financial system inquiry have all raised concerns about the effects of the current tax arrangements on financial stability.

Negative gearing would affect rents only if it reduced new housing supply.

 

And for those worried about equity? Negative gearing and capital gains are both skewed towards the better off. Almost 70 per cent of capital gains accrue to those with taxable incomes of more than $130,000, putting them in the top 10 per cent of income earners.

For negative gearing, 38 per cent of the tax benefits flow to this group. But people who negatively gear have lower taxable incomes because they are negatively gearing. If we look at people’s taxable incomes before rental deductions, the top 10 per cent of income earners receive almost 50 per cent of the tax benefit from negative gearing.

So you shouldn’t be surprised to learn that the share of anaesthetists negatively gearing is almost triple that for nurses, and the average tax benefits they receive are around 11 times higher.

Treasurer Josh Frydenberg says aspirational voters should fear Labor’s proposed changes to negative gearing and the capital gains tax.

But for those of us who aspire to a better budget bottom line, a more stable housing market and better opportunities for first home buyers, the policies have plenty to find favour.

 

Source: brisbaneinvestor.com.au

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Revealed: The top 10 suburbs to buy a bargain home and reap long-term capital growth returns – but experts warn there’s a catch

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Revealed The top 10 suburbs to buy a bargain home and reap long-term capital growth returns - but experts warn there's a catch

The top 10 suburbs for buying a bargain home have been revealed.

The top two on the list were Norlane and Lovely Banks, two northern suburbs in Geelong, Victoria, while the remaining eight all come from Queensland.

Hollywell in the Gold Coast was named as the best Queensland suburb for an affordable home with long-term capital gain, according to property researcher RiskWise.

The Gold Coast suburb, located 70km south of Brisbane’s CBD, is close to shopping centres, good schools and the beach.

Experts have warned buyers not to confuse a ‘bargain’ property with a ‘cheap’ one.

top 10 suburbs to buy a bargain home and reap long-term capital growth returns

 

The coastal suburb also has many older properties which will have plenty of potential after renovation, according to realestate.com.au.

It has a median house price of $786,614, according to property data researcher CoreLogic.

Mount Ommaney, Sinnamon Park and Gordon Park in Brisbane also make the list, followed by Gaven on the Gold Coast and Doonan in the Sunshine Coast.

Mount Ommaney, an outer suburb located 14 kilometres south-west of Brisbane’s CBD, has a median house price of $852,729.

Sinnamon Park, also located south-west of the Brisbane CBD, has a slightly lower median house price of $747,272.

RiskWise’s list ends with Gordon Park, Stafford Heights and Twin Waters in Queensland.

All the suburbs listed had a median house price of $300,000 to $870,000, with Norlane having the lowest price at $370,931 and Doonan with the highest at $871,189.

RiskWise chief executive Doron Peleg warns the public that a ‘bargain’ house does not necessarily mean buying a ‘cheap’ one.

RiskWise listed down suburbs where capital growth was expected to increase steadily over the years.

The top 10 suburbs to buy a bargain home and reap long-term capital growth returns - but experts warn there's a catch

 

‘It’s more about knowing where to buy for long-term capital gain,’ Mr Peleg said.

‘Sure, there are a lot of well-priced houses out there, but if they are not expected to grow in value down the track, then they really aren’t the best buy.

‘These (Queensland) suburbs, which all enjoyed capital growth of 13 per cent of the past 12 months, are expected to continue to do well as they have a number of things going for them.

‘For starters, they are relatively affordable and all within 100km of Brisbane which means, provided there is a good public transport and road infrastructure, commuting to work is not too much of an issue’.

The top 10 suburbs to buy a bargain home and reap long-term capital growth returns

 

Source: brisbaneinvestor.com.au

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Property Experts Reveal Surprising Areas Investors Are Snapping Up

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Property Experts Reveal Surprising Areas Investors Are Snapping Up

We all know Sydney’s property market has taken hit after hit recently — but there are other lesser-known areas that are experiencing a sudden property boom.

That’s according to Australian real estate experts, who claim that while investors may have deserted Sydney and Melbourne, their attention has turned to other regions across the country.

According to Daniel Walsh of investment buyer’s agency Your Property Your Wealth, investment activity has now firmly shifted to Queensland.

“Net migration has now overtaken Melbourne due to the affordability that Brisbane has to offer,” he explained.

“We’re also seeing rising demand particularly in the housing sector in southeast Queensland where yields are high and jobs are increasing due to the amount of government expenditure around infrastructure which is attracting families to the Sunshine State.

“With Brisbane’s population growth at 1.6 per cent and surrounding areas like Moreton Bay at 2.2 per cent, the Sunshine Coast at 2.7 per cent and Ipswich at 3.7 per cent, we are forecasting that Brisbane will be the standout performer over the next three to five years.”

Realestate.com.au chief economist Nerida Conisbee agreed, saying Sydney investors especially had started to turn their attention north.

“Interest is strong in the Gold Coast across the board although there’s more action on the south side in places like Tugun and Burleigh Heads,” she said, adding there was also a notable trend towards Tasmania, Adelaide and pockets of NSW.

“In Tasmania, most activity is definitely taking place in Hobart, but it has shifted — a lot of the action was in the inner city, but it’s now happening in the middle and outer ring suburbs, as well as in Launceston.

“Tweed Heads and Byron Bay (in NSW) have also had strong price growth at the moment,” she said, adding that in Sydney, trendy inner-city suburbs like Paddington, the premium end of town and areas like Winston Hills in the city’s west were defying the downward trend.

Ms Conisbee said long-neglected Adelaide was also finally booming after recently hitting the highest median house price ever recorded, largely driven by jobs and economic growth off the back of defence contracts, the announcement of the new Australian Space Agency and other investment in the area.

“Inner Adelaide, beachside and the Adelaide Hills tend to have the most activity but there’s also quite a lot of rental demand in low-cost suburbs so we’re expecting to see a bit more investment there in those really cheap suburbs over the next 12 months,” she said.

“There you can get houses for $250,000 so for an investor, it’s a relatively low cost in terms of outlay and the area is seeing really strong rental demand which means you’re more than likely to get tenants, so for investors it’s a really attractive area.”

Mr Walsh said Sydney still remained a solid investment option in the long term — but stressed it was just not the right time to buy in the city due to its market cycle as well as lending constraints.

“While property prices in Sydney have softened by about 9 per cent this year, they are still high, which means it’s not an affordable option for many investors,” he said, noting the city’s high buy-in prices coupled with relatively low rents made the yields quite unattractive.

“At this point in time, the high costs of entry as well as holding costs make it a location that should be avoided — but not forever,” he said.

“The thing is, Sydney is still Sydney, which means that it will always be in demand.

“Its population is forecast to grow by some three million people in the decades ahead, plus it remains our nation’s economic engine room.”

He said the entire NSW economy remained “robust” with unemployment falling to 4.4 per cent last year, with Sydney’s major infrastructure program also proving there was “much to be positive about” in Sydney.

“Sydney homeowners and investors who bought a number of years ago are still well ahead because they chose the optimal time to buy and they remain focused on the future,” he said, adding the optimal time to re-enter the market probably wouldn’t be for at least another year or two.

Source: brisbaneinvestor.com.au

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