In yet another blow to the already vulnerable Melbourne and Sydney unit markets, many potential Chinese purchasers are allegedly walking away from their property contracts. Due to changes in foreign investment policies, a large number of Chinese investors purchasing off the plan units are electing to abandon their 10 per cent deposits, pushing hundreds of units back on to the market. While your heart may not bleed for them, the effects for local property owners could hit very, very hard.
With what some are calling an Australian Property “crisis”, Chinese buyers have found themselves in the unenviable position of having their funds frozen by Australian Banks, forcing the overseas purchasers to either cancel their contracts all together, or potentially face gaudy interest rate hikes from predatory lenders, potentially up to 13%.
In addition, reports coming out of Beijing have suggested that the window for Chinese money to depart overseas for international property investment may be closing. While Hong Kong based investment, for example, is still going strong the reports of up to $1.5 billion in abandoned property contracts each month cannot be ignored.
Yes, $1.5 billion in abandoned Australian Property contracts per month over the next one to two years.
I believe these numbers provide a reason for caution, and property owners and investors need to be as well informed as possible about their surrounding markets. This is just one of several alarming warning signs I have made the focus of my last live seminars for 2016, where I inform local property owners and potential property investors of the “No-Go Zones” around Australia.
One of these “No-Go Zones” may be the Melbourne CBD where many of the one-bedroom apartments, previously contracted to Chinese investors who already outlaid their non-refundable deposits, reside.
With Melbourne owning the dubious honour of possessing some of the countries smallest units, it may be difficult for these properties to find local owners. For example, the average size of a new, three bedroom unit in Melbourne is smaller than the minimum size of a two bedroom unit in Sydney.
With tiny floor plans, some bedrooms without windows, and increasingly unaffordable price points, the Melbourne CBD unit market may need to find a magic wand to solve this problem.
And much to the dismay of those north of the border, the Sydney CBD market may need to pull a similar rabbit out of the property market hat.
Chinese nationals make up Australia’s largest group of offshore property buyers, having spent $24 billion in the year to June 2015. This kind of buying power certainly had an impact on the positive impact on local markets.
But as the big four banks tighten their internal foriegn policies and lending restrictions, many are now being asked to jump higher hurdles to complete transactions. These hurdles may turn out to be as high the very skyscrapers they are trying to buy, as most Chinese buyers want to get their loans financed through Australian banks who are slowly but surely giving them the cold shoulder.
If you’re a property owner, or are considering purchasing an investment property, it’s crucial to understand all the elements that may potentially affect the future of your investment. With a 100% success rate in selecting growth markets around Australia, we reduce risk by researching and identifying quality performing regions for our customers.
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