#106: Australia China relations - what is the risk to the Australian housing market?

The Property Trio

https://propertyplanning.com.au/propertyplannerbuyerprofessor/ In this week's Ep#84, Dave, Cate and Pete take you through an episode dedicated to this question posed from one of our listeners: "Australia's economy is highly dependent on China, do you see immediate risk in the housing market should China reduce dependency on Australia's supply chain?" Market insights Housing market consumer sentiment moves into negative territory For the first time in a year, the Westpac Melbourne Institute Consumer Sentiment index on whether now is a good 'Time to buy a dwelling' has dropped below 100 and is now in pessimistic territory. This is the fifth monthly decline in a row, dropping 7.1% from May to June and the index is now 27% below its November high of 132. The shift in sentiment is mainly caused by rapid price rises over the last 6-9 months, supported by fringe factors including: increased fixed rates from lenders, with speculation of more increases to come and various government incentives coming to an end. This index generally is a forward indicator of markets, however it could be 3 to 6 months before we see any impact on the housing market, if not longer. The hope is that this signals the possibility of more sanguine value growth without the requirement of intervention from APRA placing extra limitations on borrowers. The property buyer isn't upset at the prospect of slightly relaxed competition levels either. Australia & China relations 1. Update from the G7 summit The Property Planner takes you through some of the communiques and resolutions formed in the 47th G7 summit, held on 11-13 June. The G7 is a meeting of the 7 largest Western democratic economies, including Canada, France, Germany, Italy, Japan, UK and the US. Australia and three other nations of Japan, South Korea and South Africa were invited to attend. The G7 pledged to tackle China's market-distorting economic practices which are currently affecting Australia's exports, as well as authoritarian actions in relation to Hong Kong. 2. Foreign investment and Australian property Australia is the fourth most popular residential property market after the US, UK and Singapore with ultra-high net worth Asian cross-border property investors. The Property Buyer shares key data showing that the overall market share of foreign buyers fell to 4% in the fourth quarter of 2020 in relation to new property. This is the lowest result since NAB started tracking the data in 2010. Harsh taxes were introduced in 2015-2017 for foreign investors, and for some local markets, this had a severe impact on asset prices. However, the taxes haven't had the devastating impact that many people feared would happen. 3. Why is Australian residential property so attractive to foreign investors? The Property Professor shares key insights from a special dissertation written by one of his students on the appeal of Australian property for Chinese investors, who sheds light on some of the key aspirational, social and financial motivations held by Chinese buyers. 4. Cultural based dwelling preferences The trio discuss how current dwelling preferences have been shaped by Australia's European heritage and discuss the expected changes from the current and future generation of Asian migrants to Australia. The Property Buyer shares some of the key preferences from Asian buyers, some of the positive influences on Australian housing design and layouts to modern day, and offers a hot tip on how you can gain an edge if you're finding that you're missing out at auction. 5. Iron ore - mutual dependence on trade between China and Australia Whilst the political environment betwee...