Chinese retreat from Australian property as capital controls bite

My understanding is you can still funnel money out through Macau and HK. Besides, during the time I was working in a residential building, used to see interesting transactions to overseas students from their parents to a sum of $40k per week 'spending money' for their studies. I think I could def be a HD student if I was receiving this generous allowance to study and not have to work at all!

 

pretty generalized statement. there are legitimate business people out there.

ALso - money coming into australia are not necessarily mainland chinese also. There are the indians like the punjabis and gujaratis. There are indonesian chinese, malaysian chinese, thai chinese, hong kong chinese, singapore chinese, taiwan chinese and the koreans. All these groups do not have the controls like china.

Even govs are involved in purchasing property such as in melbourne, many buildlings were purchased in shell companies which were controlled by 3rd party interest overseas which were part of malaysian government arm. The previous cheif minister in sarawak malaysia (like premier here ) and his family interests have purchased many other properties here in australia So has the sultan of johor (another state in malaysia) has purchase millions and they're not even chinese.

 

There has been a weird phenomenon with property price in some asian countries in the last few years. Prices jumps at least double even though there is no fundamental reason behind it. No doubt investors from these countries looking for a better investment somewhere outside their countries with better yield and fundamental, australia is one of the destinations.

 

Hong Kong is the best example. Highest price real estate in the world. Demand supply. Most Asian investors who do come here initially start on the idea for investing for their children and then target other areas for lifestyle purposes. One of my frens created a trust in his children's name who were studying at Caulfield grammar and initially wanted to buy a house for his kids close to school but in the end ended up buy 10 million worth of property across melbourne

 

Actually the sudden money flowing in at the big end of town is now the Hong Kong families - although the media has missed this. The mainland Chinese have slowed a bit.

You look at who's building Ritz in Melb or the casino in Bris. I'm sensing all the $5-10m+ deals are now going to the Hong Kong groups.

 

not for long, the net is closing,

HSBC curbs mortgage offering to Chinese citizens in U.S.

 

Saw this in my mailbox. Interesting that Juwai is going public in Aus, meaning they see enough growth here.

China Startup Juwai Seeks IPO in Australia as Early as 2016

 

Im no expert in these things...
Whatever happened to the good ol transfer 1mil aud to my son/daughter or other family member atudying here for 'living expenses' ...and then a short trip to glen waverley later...bang i now have a house.

 

Maybe it’s still happening but people tend to be more discrete these days. Few people in China, not even the princelings, are flouting their wealth any more. LVs are kept in wardrobes and sports cars in their garages.

People on the mainland also appear to be buying at home again. Anecdotes I’ve heard point to a huge price boom in tier 1 cities in the last few months. The speed at which the market is reversing is quite unusual and cannot be fully explained by lower IRs and less regulation. My economist friend over there is again talking about a bubble.

Tiers 2 and 3 are still sluggish. Developments that were abandoned in the height of the building madness can still be seen unfinished while many of the finished ones are still unsold.

 

@truong I'm curious, who are the buyers of those unfinished apartments in China ?
and why the developers just run away without finishing the apartment ? are they running out of cash during the project ?

 

The common people are buyers of the unfinished apartments. A lot of whom are linked to the developers and the gov officials who approved the buildings.

Poor sales resulting in cash flow problems and credit default as interest rates on highly geared developers are usually >10%, sometimes even 20%. .

 

Correct.

These developments often very large were by local governments chasing easy money at a time of seemingly endless growth. All they needed to do was to announce some new development somewhere and the cheap land, mostly rural, that they owned (or just forcibly acquired for a pittance from farmers) instantly became gold.

The land was then “sold” to some friendly private developers with the officials keeping their fingers in the pie. Huge fortunes and whole fiefdoms could be made in the blink of an eye.

Trouble was every city, every town was doing the same thing at the same time resulting in a huge oversupply of apartments far away from amenities. Poor sales caused the schemes to come crashing down. Many properties were unfinished with only walls and no fitting inside, unsold, abandoned and decaying fast. Those that were completed are still on sale many years later but the uptake is very slow even with government subsidies. Classic tale of a bubble really.

The private developers problem was exacerbated because unlike governments they had to find finance on the informal credit market with its exorbitant IRs. But instead of going bankrupt they would just disappear, preferably overseas (several high profile cases were reported on Western media at the time) or they got arrested if their connections fell short.

One would have expected this to cause some major problem at macro level but not in China. Because financing was done privately through a ponzi-like web of private lenders using their savings, the pain was shared along the credit chain. As for the government arms nobody knows for sure how it was accounted for.

After the bust the central government has tried recently to revive the market but it looks like this is causing a boom where a boom isn’t welcome (tier 1 cities) while the places that really need growth aren’t getting it.

 

Many thanks @Kangabanga and @truong to sums up the reason behind the Ghost Towers.

Luckily Australian developers is not as greedy as those in the story.

I guess that's the reason why nowadays foreign investors buying Australian apartment instead.

 

Yes that in addition to aust beinh transparent, more stable, less corrupt, and more collective governance especially in regards to china thats more authoritarian. ..

 

LOL... "less corrupt" is definitely the right word to use... We all know the story about the guy in Melbourne who approved 5 residential towers in a day and how some plots of land were resold by local developers to foreign developers for a tidy profit after the D.A. were approved for higher towers by some guy...

Well at least we are not run by "commies". Though I just heard in some parts of Melbourne, you could be shot or disappear for crossing the wrong people, gosh!

 

I don't like that "guy"...

 

$US3bil roughly leaving HK every month this year so far, with $550bil of outflow last year total - approx $US4.5bil a month.

Now, what about India's capital flight? Malaysia's?

All highly publicised, globally recognised problems and all looking for the same market...

...Stable return required in a politically stable country.

 

Dunno how this will all work out but i do think there will be a significant capital flight from india, se asian countries in the coming years. Might not be as large as the chinese over the last few years..but will still be large.

 

it's still providing stimulus where there is none, or marginally some, locally.

 

Wouldn't touch Juwai at the moment. Lots of physical raids in China now based on anecdotal evidence, and people being brought in. Limited money gets out.