Whilst this rise in foreign investment has seen many Australians become defensive about the future of property prices, with many voicing concerns about what this means for affordability for future generations, we think we all need to prepare for the fact that this scenario is yet to hit full steam.
When you take a wider look at the factors driving this influx of investment, you soon discover a phenomenon often referred to as the Asian Century.
Put simply, this phenomenon highlights the fact that more than one-third of the world’s population will exit ‘poverty’ over the next 15 years and enter the ‘middle class’.
That’s 2.5 billion people who will soon have more buying power than they ever have. This ability to walk into a supermarket for perhaps the first time, our even the slightest upgrade to housing, etc will create a growing demand on both the Australian mining industry and the Australian agricultural industry.
Prepare to see multiple waves of a ‘Mining Boom’ and a ‘Dining Boom’ over this 15-year period.
This rising Middle Class in Asia should certainly bolster employment opportunities here in Australia to cater for their growing demand on our mining and agricultural industries.
Right now, for the first time in 300 years, half the world’s middle class are living in Asia. And China, who was a minor player in the world’s economy as little as 40 years ago, is now the world’s single largest national economy.
Australia’s proximity to this emerging Asian economy can already be linked to the increase in foreign investment since 2013, particularly from Chinese investors.
And whilst there will be ‘ebbs and flows’ to this impact on Australia’s economy it’s really the growth in the volume of affluent Chinese seeking to purchase Australian property that shouldn’t be underestimated.
Even at this early stage we are seeing brand new units being purchased by wealthy Chinese investors with the sole purpose of leaving them sitting vacant until their young children may wish to complete their university studies in Australia. We are also seeing development sites being purchased by Chinese developers at prices that simply make it unviable for Australian developers to even consider developing the sites themselves. And, whole suburbs emerging and embracing Asian culture to a point where it’s easy to imagine you are not even standing in an Australian suburb.
There's no doubt, this is an important factor for the Australian property market going forward, however it is just a single piece of the patchwork quilt that makes up the fabric of our local markets. There are 3 or 4 equally predominant elements that investors need to be fully aware of in the coming years to avoid potential disaster.