21 Nov Where have all the Chinese gone? – Gavin Norris
We get an update on foreign buyers and their influence on the Australian property market from the head of Juwai in Australia – Gavin Norris. Juwai, of course, is the number one Chinese international property portal.
Kevin: I’m delighted to say that I’m joined now by the head of Juwai in Australia. Juwai, of course, is the number one Chinese international property portal, with more than 2 million visitors from China and other countries and showcasing 2.5 million listings from 89 countries. This is a very big website. Of course, we’re interested in what’s happening with foreign buyers into Australia, as well. Gavin Norris joins me, head of Australia for Juwai.
Gavin, thanks for your time.
Gavin: Thanks, Kevin. Thanks for having me.
Kevin: It’s great that the Juwai has someone on the ground now in Australia, because you’re obviously feeding back and giving us information about what’s driving the market for foreign buyers. What’s the fascination with Australia and New Zealand for overseas right now?
Gavin: Yes. Good question. It definitely is a fascination. When you look at the traffic through Juwai, obviously, as you said, we’re a portal from Chinese consumers looking at international property. When they come to our site, about 40% of traffic goes to U.S. A whopping 30% to 35% actually comes to Oz and New Zealand, so we have a huge share of eyes.
What they’re attracted to…, we often run surveys and ask inquiries do come through why they’re looking to invest in countries such as Oz. Their main drivers when looking at overseas investment, typically, is safety and quality of lifestyle as well as infrastructure, but safety is a key driver.
Then their key motivation on top of that is education – and quality education as you’ll often hear around the traps. That is a key motivator for the Chinese, and that’s very true as far as our consumers.
When you look at safety and you look at the education options down here, that’s why we end up as such an attractive proposition for the Chinese.
Kevin: It’s a huge area of growth for Australian property to look at overseas buyers, particularly from China, and we’ll talk about how big that can be. But firstly, let’s just deal with the emotional debate that happens in Australia with foreign buyers and jacking up prices.
The point I’d make is about the research from the Property Council that tells us every new apartment bought by a foreign buyer enables four new apartments for local buyers. How do you react to that statement, and how true is it?
Gavin: Yes, true. The Australian government did a bit of research when that was all coming to hand about 18 months ago. Sure, foreign buyers are an important part of the market but still a very small part of the whole buying market across Australia. Indeed, Chinese are the largest portion of that foreign buyer market. Of course, they’re only typically able to buy off the plan rather than second-hand assets.
They are I think an important element but not the be all and end all of driving new construction and new supply, which cities like Sydney, Melbourne, Brisbane do cry out for and have been crying out for for some time. So I think they’re integral.
When you go one step further than that, coming back to why they’re actually buying in Australia, it’s not typically as a main driver for investment. They’re all here largely for other reasons and other purposes, and the main one being education.
Real estate just ends up being a consideration along the way to sending their children to universities, secondary schools, and ever more so into private schools. Their long-term driver is a value to the economy.
They’re a small part still – we would want to over-play that – but important drivers of bringing sustainable revenue into the parts of the economy where we need the most.
Kevin: Gavin, the restrictions on foreign buyers that have been bought into play in recent times, has that played much of a dampener on the interest from foreign buyers?
Gavin: No, not from what we can see. A few interesting events that occurred more recently were the stamp duty increases and the land tax increases around midyear for the Eastern states.
The growth rate that we’re seeing early in the year before that was introduced was quite strong. When that was announced, growth was still positive but slowed down while the changes were surfaced and people absorbed what they meant. Now, they’re in place, largely, growth rates are back to where they were earlier in the year.
Those kind of thing are just a blip on the radar as far as what we’re seeing as Chinese demand for Australian property, again, playing towards their longer-term objectives here. When they’re looking at ten-year horizons for education and other purposes, those kind of restrictions or changes in the investment dynamics are a much smaller consideration as part of that plan.
Kevin: How much foreign money is invested in Australia?
Gavin: We can look at what comes through our website, for example. I f you look at what we saw as inquiry value for Australian property through our website over the last 12 months, we had almost $6 billion (U.S. dollars, that is) in inquiry across Australian real estate. That’s a huge sum. A fair sum goes to Melbourne. For every three inquiries, we get for the city of Melbourne, we have two to Sydney. It’s about the same ratio from Sydney to Brisbane. So, substantial amounts.
Kevin: What are your predictions for what’s going to happen in 2017 with Chinese buyers?
Gavin: I don’t think there’s any reason to say that it won’t be a stronger year than what we’ve experienced this year. A lot of their demand is driven by what’s happening in China. Anyone who tells you that the Chinese presence globally, not just Australia as far as investment goes, and not only just in real estate but commercial assets as well is going to be a “Here today, gone tomorrow” story, it’s definitely not true.
The main thing is just the evolution of Chinese capital in second-, third-, fourth-tier cities and their waking up to the possibility of investing overseas and spending their investment, too, including assets in places like Australia.
As they wake up to the opportunities, the second wave of capital will come. We’ve seen that in the institutional space where the large insurance groups have been here, the large developers, Greenland [6:49 inaudible], but now, we’re talking about other smaller funds – still large in our terms – and Chinese institutions coming to town. It’s much the same when you’re talking about the mom and dad purchases, as well.
We just see growth continuing to accelerate to the large numbers that are forecast. I think the numbers expected will end up with doubling the kind of investment that we’re seeing today in the next ten years.
Kevin: Wow. It’s amazing. Where do Chinese buyers like to buy, and how much do they spend?
Gavin: Again, as I’ve touched on before, it’s regions and locations that play up to their motivation, so safe areas with good amenity and, candidly, a good touch of Chinese community with a backbone of education and other options for them.
As I said before, Melbourne is our largest market, which surprises some people. Sydney, second. Brisbane, third. Then Adelaide, Gold Coast, Canberra, Perth, these more secondary gateway cities are definitely increasing at a rapid rate as the Chinese consumer gets a little bit more savvy about where they place their capital. Affordability is a key factor as to why we see some more attraction to Melbourne over Sydney.
Kevin: I saw a repot recently where I think Juwai predicted that Canberra may have a chance of being the next hotspot.
Gavin: We think so. Obviously, Canberra airport is opening itself up to the international markets with flights to New Zealand and Singapore. We see that all over the world, particularly in areas like Miami in the U.S. where if that happens, Chinese investment flows soon after. So we expect strong growth out of these areas that offer all those benefits that I touched before, provide great access, have great universities, and Canberra’s got some of Australia’s best obviously.
Canberra, Sydney, Melbourne, we’re just an easy trip away and not too far as far as time zone goes, as far as many of the cities within China. It’s bit of a perfect hit. With the affordability metrics you get out of Canberra versus Sydney, it makes a lot of sense that we’ll see a strong growth there.
To answer the other half of your question – what price point are they looking at – our typical purchaser isn’t the billionaire Chinese person coming out; it’s an investment range around about $700,000 to $900,000 (Aussie). They are at more the mid-market range than the top-end, the average consumer.
Kevin: Yes. Gavin Norris from Juwai. Thank you so much for your time. Great talking to you, mate.
Gavin: Thanks, Kevin.