In certain parts of Australia, home-grown buyers have become fewer and more reluctant. Chinese buyers by contrast are sometimes wealthier and their numbers are growing rapidly. Andrew Taylor, CEO – Sales & Marketing of Juwai.com, explains how to profit from the changing marketplace.
Being entrepreneurial, real estate agents and principals are some of the best at learning from other parts of the economy. Tourism is the industry with the most to teach at the moment. Despite the high dollar, the tourism industry has been raking in money from Chinese visitors.
Chinese tourists now spend more money in Australia than tourists from any other country do. They spent $3.8 billion in 2011, up 15 per cent on the previous year, according to Tourism Australia.
Real estate is seeing a similar China boom. Chinese buyers now spend $2.8 billion per year on Australian property, and this amount is growing. The biannual rate of growth is about 150%, according to data collected by Juwai.com.
At the same time, home-grown Australian buyers are becoming increasingly reluctant to enter the property market. Trusted market analysts like SQM Research managing director Louis Christopher are neutral to negative about any type of rebound.
Other data backs up the grim outlook for domestic buyers. Housing starts fell in 2011 to their lowest level since the Global Financial Crisis.
The total number of property transactions has also been falling. In 2011, the number of home sales dropped to the same level as it was in 1996. There just are not enough Australian buyers.
Chinese buyers are like a bright burst of sunshine slashing through some of these storm clouds. A recent headline in Perth’s The Sunday Times reads, “Foreign home buyers rule the market.”
Across the continent, on the Gold Coast, Chinese businesswoman Amanda Sun bought three houses worth a total of $3 million — after visiting just once as a tourist. Sun plans to migrate to Australia and live in one of her newly-bought homes. She will rent out the other two.
At the Stamford Residences, a 30-level tower at the Rocks in Sydney, one Chinese family recently bought a $2 million apartment. It will serve as student housing for their child to live in while studying in Australia.
In just this one project, six of the building’s 122 apartments sold to buyers from mainland China.
A Chinese businessman named Jiang Mei bought one of the most expensive house sales of 2011, a Point Piper, Sydney house for $32.4 million.
Soon after his purchase, other Chinese buyers acquired a $14.5 million house in Sydney’s Rose Bay. Then, a Chinese family bought in Rose Bay, for $15 million. Another Chinese buyer picked up a Sydney house for $5.8 million, and a Chinese investor bought a $1 million investment property, his second, as a rental.
These anecdotes are supported by the data. The Wall Street Journal reported that capital-city sales to Chinese buyers doubled over 12 months.
Mosman real estate agent Sandie Dunne told the Sydney Morning Herald that Chinese buyers are the only ones with money to spend at the moment. Meanwhile, Chinese buyers account for about 60% of enquiries and purchases at the projects of Melbourne developer Morry Schwartz, of PanUrban.
Is there any sign that Chinese buying of Australian property will slow down in the future? No. While there will of course be variation in the trend according to conditions, the underlying direction is for continued growth.
There are several reasons for this. China and Australia have an increasingly strong commercial relationship. Many Chinese consider Australia a natural place to invest: close by, stable, developed, in possession of strong rule of law and excellent educational institutions, and enjoyable to visit.
China’s economy recently became the second largest in the world, and is on track to surpass even the United States in size within the next five years, says the World Bank.
China’s economy recently became the second largest in the world, and is on track to surpass even the United States in size within the next five years, says the World Bank.
As China grows and continues to integrate more deeply into the world, wealthy Chinese are following the path laid out by other nationalities before them. They are diversifying their wealth by investing in overseas property, businesses and equities. They also send their children to good schools in English-speaking countries for an education that will serve them well in life.
The fact that China now sends more immigrants to Australia than any country bar the UK and New Zealand, points out another important fact: most wealthy Chinese want to move out of China.
A majority of Chinese millionaires (in Australian dollar terms) are either considering emigration overseas or have already completed the process. The richer you are, the more likely you are to be packing your bags for a one-way trip out of China, found the 2011 Private Wealth Report on China published by China Merchants Bank and Bain & Company. Australia is a prime destination for many of these wealthy immigrants.
Experts say that agents who want to profit from Chinese buyers need to take proactive actions. Here are their top four tips:
- Be prepared to market your listings on portals like Juwai.com, which specifically target Chinese buyers. Chinese Internet users have different expectations than Australians do, and they often are more comfortable searching for property in Chinese than in English.
- It’s a cliché but nonetheless true that real estate is a people business. Invest effort in building a bond with your buyer. Learn something about the Chinese economy and political situation, and even a few words of the language, especially “please” and “thank you”.
- If you belong to an agency network, ask your network’s trainers for specific preparation for dealing with buyers from other countries. Some networks have excellent courses available.
- Tell everyone in your marketplace that you are marketing your listings to Chinese buyers. Most people by now know that China’s economy is the fastest growing in the world. Your ‘savvy’ in tapping this source of buyers can differentiate you from other agents and help you win more listings. That’s vital in this slower marketplace.
On track to soon have the largest economy in the world, China is becoming the largest consumer of many goods and services around the globe. The Chinese already buy more Lamborghinis and Rolls-Royces than anybody else in the world.
By 2015, China will be the world’s leading market for luxury goods, predicts McKinsey & Co.
In the US and many countries in Europe and Asia, the Chinese are also the fastest growing group of property buyers. This is true in Australia, as well. Good real estate agents will take advantage of it.
Andrew Taylor is Founder – CEO Sales & Marketing of Juwai.com, the No. 1 Chinese real estate portal for property in Australia and around the world. Andrew has over a decade of online and media experience, and a half-decade providing online services to agents. For more information, visit www.juwai.com/advertise.
