News / Economy

Amid Graft Crackdown, Wealthy Chinese Invest in Australian Property

Land being developed for the new home construction is pictured at sunset in southern Sydney, Australia, Aug. 14, 2014. More wealthy Chinese are moving their money out of China to invest in Australia's property market.
Land being developed for the new home construction is pictured at sunset in southern Sydney, Australia, Aug. 14, 2014. More wealthy Chinese are moving their money out of China to invest in Australia's property market.
Reuters

More wealthy Chinese are moving their money out of China to invest in Australia's property market as a corruption crackdown in the world's second biggest economy gathers momentum, property consultants and lawyers said.

They said their clients had told them they had legitimate funds to invest, but were concerned about being caught up in an investigation, which in China often delves into the affairs of dozens of associates of the main target, and losing that wealth.

“What we see at the moment is that there are more Chinese who would likely send more money out of the country so they don't get caught up in this crackdown,” according to David Green-Morgan, global capital markets research director at real estate services firm Jones Lang LaSalle.

It's one of the most visible signs of the fear being caused in China by President Xi Jinping's 18-month-old drive against the pervasive graft that he says threatens the Communist Party's survival, a fear that is even causing some officials to take their own lives.

Beijing's campaign has particularly targeted so-called “naked officials”, the term for state employees whose spouses or children live overseas. Those officials are generally suspected by the party of using such connections to illegally move assets.

Ordinary Chinese citizens can legally transfer only $50,000 overseas each year, but vast sums leak out of China using a variety of loopholes, such as funneling money through the Chinese territory of Hong Kong.

“The restrictions in China are becoming more onerous,” said Green-Morgan. “That's triggered an increase in the amount of money that's looking to move out of China or probably is already outside of China and is looking to be spent.”

Safe haven

Australian property has long been a popular choice for Chinese money -- both legitimate and illegitimate - but the flow of investment appears to have accelerated of late.

According to Australia's foreign investment review board, China was the No.1 source of foreign capital investment into Australia's real estate in 2013. It received approvals to invest nearly $6 billion ($5.58 billion) into the sector, up 41 percent from a year ago.

“They are worried so they are looking for a safe place,” said a Sydney-based immigration lawyer, who is advising on setting up a new fund exclusively for Chinese investors and regularly travels to Beijing and Shanghai. “They don't want returns, not necessarily. They want a safe place,” he added.

China is expected to see an annual growth of 20 percent in outbound real estate investment in the next decade, up from $11.5 billion last year, property agent Savills has forecast.

That will help push Chinese demand in Australian property  by 15 percent over the next 12 months, said Andrew Taylor, co-CEO of Juwai.com, the largest real estate portal that targets Chinese buyers looking abroad.

Such strong interest is likely to boost Australia's apartment construction, which is set to hit record levels by 2017 and remain elevated through to 2020, Brokerage CLSA said in a report this month titled “The Magic Dragon.”

Favored destination

Wealthy Chinese have been pouring money for years into real estate in major cities in North America, Europe and Asia, including New York, London and Sydney.

Some of their favorite markets are becoming less attractive, though, for Chinese investors: A 15-percent stamp duty introduced for foreign buyers in Hong Kong and Singapore, where cash-rich mainland Chinese had been blamed for driving up prices, has cooled interest, while Canada recently canceled its Immigrant Investor Program, popular with wealthy Chinese.

Australia, in contrast, may ease rules on a visa scheme aimed at luring investment from wealthy Chinese after complaints that disclosure requirements are too strict, lawyers and migration agents have said.

Australia is now the second-most favored destination for Chinese property buyers, behind the United States but ahead of Canada and Britain, according to Juwai.

Property investment into Australia provides an emigration option to Chinese buyers and can also establish a base for their children's education in an English-speaking country.

It also offers the kind of robust, independent legal system sought by those looking to shield their assets from the Chinese authorities.

“A somewhat more disturbing motivation for emigration and shifting capital out of China is that many are seeking protection of their wealth for both economic and political reasons,” said CLSA's Andrew Johnston, without elaborating.

Tip of the iceberg

An Australian government inquiry into foreign residential real estate investment policy is due to report on October 11, but consultants and researchers Reuters spoke to did not expect any rule changes that could hurt the construction sector.

Existing regulations restrict non-residents to buying only new-build property.

Chinese property developers have been aggressively investing abroad to cater to domestic demand and to diversify their assets in response to a cooling property market at home.

Hong Kong-listed Wanda Commercial Properties has set up a $1.6-billion fund to invest in Australian real estate, while China's Greenland Holding sold every apartment in a Sydney project last year within the first three hours for a total of 2 billion yuan [$325 million].

Century21 and Fairfax Media's Domain.com, Australian real estate portals, have launched Chinese language websites, and REA Group recently announced that SouFun, a major real estate online marketplace in China, would carry Australian listings.

Australian developers are also flying to China to promote their properties.

“I think this investment is a tip of the iceberg,” said Warren Duncan, director at real estate agent LJ Hooker. “It is such a small portion of developers and purchasers from China that have bought in Australia compared to the population of China. So, the trend will continue for a long time to come.”

 

You May Like

Multimedia Social Media Documenting, Not Driving, Hong Kong Protests

Unlike in Arab Spring uprisings, pro-democracy protesters in Hong Kong aren't relying on Twitter and Facebook to organize, but social media still plays a role More

Analysis: Occupy Central Not Exactly Hong Kong’s Tiananmen

VOA's former Hong Kong, Beijing correspondent compares and contrasts 1989 Tiananmen Square protest with what is now happening in Hong Kong More

Bambari Hospital a Lone Place of Help in Violence-Plagued CAR

Only establishment still functioning in CAR's second city is main hospital More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
The Legacy of Jimmy Carter: The Preacher from Plainsi
X
October 01, 2014 10:45 AM
It is common in the United States to see tourists flock to sites associated with America's presidents. Some are privately owned and others are run by the National Park Service or the National Archives -- but most have helped draw business and people into the towns and cities where they are located. As VOA’s Kane Farabaugh reports, there is one particular presidential hometown that is unique in what it has to offer those who make the trip.
Video

Video The Legacy of Jimmy Carter: The Preacher from Plains

It is common in the United States to see tourists flock to sites associated with America's presidents. Some are privately owned and others are run by the National Park Service or the National Archives -- but most have helped draw business and people into the towns and cities where they are located. As VOA’s Kane Farabaugh reports, there is one particular presidential hometown that is unique in what it has to offer those who make the trip.
Video

Video Hong Kong Protests Draw New Supporters on National Holiday

On the 65th anniversary of the founding of Communist China, Hong Kong protesters are hoping to stage the largest pro-democracy demonstration since the 1989 Tiananmen protests. VOA's Brian Padden visited one of the protest sites mid-day, when the atmosphere was calm and where the supporters were enthusiastic about joining what they are calling the umbrella revolution.
Video

Video India's PM Continues First US Visit

India's prime minister is on his first visit to Washington, to strengthen political and economic ties between the world's oldest and the world biggest democracies. He came to the U.S. capital from New York, the first stop on his five-day visit to the country that denied him an entry visa in the past. From Washington, Zlatica Hoke reports Modi seemed most focused on attracting foreign investment and trade to increase job opportunities for his people.
Video

Video Malaysia Struggles to Stop People Joining Jihad

Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Could US Have Done More to Stop Rise of Islamic State?

President Obama says airstrikes against Islamic State militants in Syria will likely continue for some time because, in his words, "there is a cancer that has grown for too long." So what if President Obama had acted sooner in Syria to arm more-moderate opponents of both the Islamic State and the Syrian government? VOA State Department Correspondent Scott Stearns reports from the United Nations.
Video

Video Treasure Hunters Seek 'Hidden Treasure' in Central Kenya

Could a cave in a small village in central Kenya be the site of buried treasure? A rumor of riches, left behind by colonialists, has some residents dreaming of wealth, while others see it as a dangerous hoax. VOA's Gabe Joselow has the story.
Video

Video Ebola Patients Find No Treatment at Sierra Leone Holding Center

At a holding facility in Makeni, central Sierra Leone, dozens of sick people sit on the floor in an empty university building. They wait in filthy conditions. It's a 16-hour drive by ambulance to Kailahun Ebola treatment center. Adam Bailes was there and reports on what he says are some of the worst situations he has seen since the beginning of this Ebola outbreak. And he says it appears case numbers may already be far worse than authorities acknowledge.
Video

Video Identifying Bodies Found in Texas Border Region

Thousands of immigrants have died after crossing the border from Mexico into remote areas of the southwestern United States in recent years. Local officials in south Texas alone have found hundreds of unidentified bodies and buried them in mass graves in local cemeteries. Now an anthropologist and her students at Baylor University have been exhuming bodies and looking for clues to identify them. VOA’s Greg Flakus has more from Waco, Texas.
Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.

AppleAndroid

World Currencies

EUR
USD
0.7866
JPY
USD
109.25
GBP
USD
0.6139
CAD
USD
1.1120
INR
USD
61.428

Rates may not be current.