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As another Australian, our housing prices is broken for multiple reasons but foreign investment is a _major_ contributor. Credit Suisse research indicates that

As another Australian, our housing prices is broken for multiple reasons but foreign investment is a _major_ contributor. Credit Suisse research indicates that "foreigners are acquiring 25 per cent of newly completed supply in NSW and 16 per cent in Melbourne, or 21 per cent if we combine the two states". The total value of new houses in both states was $39 billion over the relevant 12 months. After the Chinese government cracked down on monetary restrictions (i.e. Citizens of China can normally only convert US$50,000 a year in foreign currency and have long been barred from buying property overseas), Lend Lease reported 30 to 40% of foreign purchases now being cash settled. Transparency International consider Australia the worst money laundering property market in the world. Foreign investment, especially for countries which avoided the 2007 housing bubble such as Australia, is a major issue. A friend will be posting an article on the multiple bubbles he sees in the Australian economy, and property is potentially the most concerning of all given how exposed our banks are to housing loans. We may find Australia finally seeing their house bubble pop like the US in 2007. http://www.smh.com.au/business/property/australian-property-cheap-for-chinese-buyers-credit-suisse-20170323-gv5ets.html http://www.smh.com.au/business/property/australian-property-... https://www.transparency.org/whatwedo/publication/doors_wide_open_corruption_and_real_estate_in_four_key_markets https://www.transparency.org/whatwedo/publication/doors_wide... Updated to include direct link to Credit Suisse: https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=csplusresearchcp&document_id=1072773781&serialid=vGaaRmOdA9BYZyKVi%2BOQvCfX%2BJZ8vpuaqcWf8o4NoF8%3D https://research-doc.credit-suisse.com/docView?language=ENG&...

ACow_Adonis 9y ago
Can hacker news link me to the credit suisse research? I only ask because I work a bit in this area, and I've gotten into the habit of ignoring all reporting in the press because they neither link to or critically engage with their sources. Incidentally, I'm not saying foreign investment plays no part in such markets, but that its relative contribution has always been overstated. Adittionally, the policy responses I suggest which address house prices work irrespective of foreign/local mixes for most markets.
- sheepmullet 9y ago
  > I'm not saying foreign investment plays no part in such markets, but that its relative contribution has always been overstated. If anything it has been understated. 1) House pricing is incredibly demand sensitive. A sustained 10% drop in demand would crash house prices. 2) Local buyers expect capital gains. It is the reason they buy. Rental returns on Sydney property for example are roughly the same as fixed deposit rates. Where do buyers expect these capital gains to come from? For the most part from rich foreign investors (and to a lesser degree very wealthy immigrants). This means a large fraction of the local investment market is also driven by foreign actors.
dcw303 9y ago
The Credit Suisse doc says foreign investment is 25% of the state of NSW, and 16% of Victoria. But I wonder what the percentages are for Sydney and Melbourne. My anecdotal evidence is that foreigners don't really buy outside the capitals, so I expect it to be much higher. Which would have a stronger effect on property prices, as the capitals tend to drive prices for the smaller towns.
- poynt 9y ago
  hi dcw303, i have a blockchain related question for you, is there a more private way to reach you? I followed you on twitter, I'm @zippyferguson.
- jpatokal 9y ago
  The figures are specifically for newly completed supply, the vast majority of which is also in Sydney and Melbourne. They aren't building teetering 30-story apartment towers in Dubbo or Wagga Wagga.
- flukus 9y ago
  > But I wonder what the percentages are for Sydney and Melbourne. My anecdotal evidence is that foreigners don't really buy outside the capitals, so I expect it to be much higher. They might not be interested in country towns but they are very interested in booming coastal towns like Gold/Sunshine Coast in Queensland, I'd assume the some would hold in places like Byron Bay and Coffs Harbor.
stephen_g 9y ago
Not to mention that the skilled migration program that the Federal Government is running (while we have some of the lowest wage growth, and some of the highest levels of underemployment and labour underutilisation in our history mind you) is absolutely massive - one of the largest in the developed world in proportion of our population. NZ is right up there with us in that too. Nothing like huge population growth to keep the demand for housing up. Sadly the discussion has been so poisoned by the racists and xenophobes (like One Nation etc.) that we can no longer have a rational conversation about it...

ACow_Adonis 9y ago

Can hacker news link me to the credit suisse research? I only ask because I work a bit in this area, and I've gotten into the habit of ignoring all reporting in the press because they neither link to or critically engage with their sources. Incidentally, I'm not saying foreign investment plays no part in such markets, but that its relative contribution has always been overstated. Adittionally, the policy responses I suggest which address house prices work irrespective of foreign/local mixes for most markets.

sheepmullet 9y ago
> I'm not saying foreign investment plays no part in such markets, but that its relative contribution has always been overstated. If anything it has been understated. 1) House pricing is incredibly demand sensitive. A sustained 10% drop in demand would crash house prices. 2) Local buyers expect capital gains. It is the reason they buy. Rental returns on Sydney property for example are roughly the same as fixed deposit rates. Where do buyers expect these capital gains to come from? For the most part from rich foreign investors (and to a lesser degree very wealthy immigrants). This means a large fraction of the local investment market is also driven by foreign actors.

dcw303 9y ago

The Credit Suisse doc says foreign investment is 25% of the state of NSW, and 16% of Victoria. But I wonder what the percentages are for Sydney and Melbourne. My anecdotal evidence is that foreigners don't really buy outside the capitals, so I expect it to be much higher. Which would have a stronger effect on property prices, as the capitals tend to drive prices for the smaller towns.

poynt 9y ago
hi dcw303, i have a blockchain related question for you, is there a more private way to reach you? I followed you on twitter, I'm @zippyferguson.
jpatokal 9y ago
The figures are specifically for newly completed supply, the vast majority of which is also in Sydney and Melbourne. They aren't building teetering 30-story apartment towers in Dubbo or Wagga Wagga.
flukus 9y ago
> But I wonder what the percentages are for Sydney and Melbourne. My anecdotal evidence is that foreigners don't really buy outside the capitals, so I expect it to be much higher. They might not be interested in country towns but they are very interested in booming coastal towns like Gold/Sunshine Coast in Queensland, I'd assume the some would hold in places like Byron Bay and Coffs Harbor.

stephen_g 9y ago

Not to mention that the skilled migration program that the Federal Government is running (while we have some of the lowest wage growth, and some of the highest levels of underemployment and labour underutilisation in our history mind you) is absolutely massive - one of the largest in the developed world in proportion of our population. NZ is right up there with us in that too. Nothing like huge population growth to keep the demand for housing up. Sadly the discussion has been so poisoned by the racists and xenophobes (like One Nation etc.) that we can no longer have a rational conversation about it...