Chinese buyers to cushion housing correction: Credit Suisse

The Credit Suisse report, released last week, looked at new data from state governments detailing foreign demand for Aussie housing.

“We find foreigners are currently buying the equivalent of 25 per cent of new supply in NSW and 16 per cent in Victoria,” the report said, noting that almost 80 per cent of foreign demand is from China.

“Chinese buyers continue to settle on their purchases despite the numerous impediments,” it said.

Local banks have tightened credit for foreign buyers while state governments in NSW and Victoria have introduced or increased taxes for overseas buyers of Australian real estate. Nevertheless, Credit Suisse forecasts Chinese demand for Australian housing will continue to grow, supported by Chinese wealth creation and attractive valuations compared to major Chinese cities like Shanghai and Beijing.

“While Australian housing is at peak cycle, we believe the pace and severity of the coming downturn will be cushioned by Chinese demand,” the report said.

While it may baffle many Sydneysiders, Australian housing is actually relatively cheap for Chinese investors. For example, the median price of a two-bedroom apartment in Shanghai is around $900,000. Credit Suisse says this is 25 per cent more than the median apartment price in Sydney.

Investment returns are also more appealing in Australia. The investment bank explained that the gross rental yield in Shanghai is 1.5 per cent – less than half of what is available in Sydney.

“Yes, our property is expensive when we compare it to our own history, but it is cheap when compared to Chinese property,” said Credit Suisse.

Charles Pittar, CEO of Chinese real estate listings website Juwai.com, said the Credit Suisse report should put to rest any concern about foreign buying in Australia.

“It shows robust and growing purchasing despite local taxes and lending restrictions and Chinese capital controls,” Mr Pittar said.

"The scale of the construction boom in Australian cities proves the power of foreign investment to provide new housing for local buyers.

“It's no coincidence that the construction boom was simultaneous with the surge in Chinese buying. Chinese are more likely to buy new property in the preconstruction phase, giving developers the commitments they need to start construction and offer the remaining completed units to local buyers."

Credit Suisse has added construction materials giant Adelaide Brighton to its ‘long’ portfolio.

[Related: Chinese money and Australian real estate]