The story of Chinese buyers pushing out local families from the market is a commonly accepted misconception, and this topic still comes up in conversations about property investment. While real estate in the Byron Bay area is not high on the list for international buyers or investors, more local investors are seeing hidden gems here, which inevitably fuels debate.
Xenophobia has a lot to do with the negativity of this issue. Even in Sydney, a good proportion of people seen buying at real estate auctions are probably Australian residents of Chinese descent. The irony is that government manoeuvring may be increasing foreign buying more than lessening it. Residential property is now a global product and is traded and speculated on continuously and we cannot restrict some and not others. Although most people these days look on their home as an investment as well as a place to live, others would feel uncomfortable that the suburban home is under the economics rather community ledger.
State and federal governments may wish to support first homeowners and young families as well as make housing more affordable. Why then is a third of the value of the new home fees, duties and taxes, and why do they maintain investor friendly incentives like negative gearing? Unfortunately the economics beat the social once again.
In this article, it is interesting to look deeper into why foreign buyers (read Chinese) wish to buy Australian residential property. One factor is as a currency play. Foreign exchange speculators move money around the globe but it can be more lucrative to convert a currency into an asset, wait for it to mature as a capital gain, and move it back with a favourable exchange rate, experiencing a profit both ways as well as an asset capital gain.
Australian buyers were doing this play recently. Buying USA residential property post GFC when the AUD$ was nearly at parity with the USD$ and US property was at all time lows. Buyers were able to get a bargain in the depressed urban areas of Florida, Georgia or California. The property market has since recovered, a sale and repatriating the money back to Oz when the currency is now below 80 cents has meant a double profit.
I cannot imagine Americans shaking their heads in the suburbs saying, “Those goddamn Aussie speculators”. Chinese buyers are now looking at a similar opportunity here when the Australian dollar, as well as interest rates, are low. The RBA is attempting to keep both these levers low to assist our economy. Globalisation, for good or bad, means that anyone else can benefit from it as well.