A study of almost 900 Sydneysiders about their perception of foreign investors in real estate finds a deep-seated fear that property is being bought and house prices driven by foreign, particularly Chinese, investment.
The findings, just published in the Journal of the Australian Geographer, found that overall there also remains a high level of public concern and discontent about foreign investment with more than half of the Sydneysiders believing that government regulation of foreign investment is ineffective.
The November 2015 study that sought the individual views of Australians living in one of the least affordable property markets in the world was led by Dr Dallas Rogers, a housing researcher in the University of Sydney’s School of Architecture, Design and Planning. It followed a 2014 Australian Government Parliamentary Inquiry into individual foreign investment in residential real estate due to mounting public pressure.
The study was undertaken due to limited data available about Australians’ views of foreign real estate investment, which has had bipartisan government support for almost half a century.
“The recent federal budget saw the government come down hard on foreign investors, which demonstrates the dilemma that the government is facing as it attempts to manage foreign investment alongside a disenchanted Australian public,” said Dr Dallas Rogers.
“Historically there has always been cultural tension over land and home ownership in this country that began with the arrival of British settlers in the late 1700s, the Chinese gold rush in the 1850s, and the White Australia policy in the early 1900s.
“In the 2000s, we again face significant societal change due to economic, political and social forces from Asia which, given its proximity to Australia, is reshaping our cities. This is the first time we have sought the individual opinion of Australians on the ground about the impact they believe foreign investment is having in their communities,” he said.
An online survey obtained the views of people ranging from 18 to 65 years old who live in the Greater Sydney region. It posed questions about housing affordability, factors influencing Sydney house prices, views about foreign investment, and the perceptions of Chinese investors specifically.
More than 64% of respondents cited foreign investors as the main reason for driving up house prices, despite little data on the inflationary impact of foreign investment on property. This is in spite of National Australia Bank (NAB) data in 2016 showing that Australian residents and investors still make up a greater proportion of real estate buyers in Australia, accounting for 52% of sales, while only 14% were foreign investors. The other most cited triggers for driving prices were low interest rates (37% of respondents), planning (36%) and local residents/domestic investors (32%).
The real estate industry recognises that the sale of established properties plays a big role in shaping housing prices, but there are strict conditions placed on foreign investors. Foreign investors can buy new properties, but can only purchase established homes if they meet certain criteria, such as a property that will be used for foreign student accommodation. Domestic residents and investors therefore still make up almost 60% of this market compared to 8.6% (NAB, 2016) who are foreign investors.
More than 56% of survey respondents are concerned about foreign investors and investment, disagreeing that they should be able to buy residential real estate in Sydney. This concern is consistent with public views of foreign investment policy, with over 63% of respondents also disagreeing that the government should encourage more foreign investment. Furthermore, 52% believe that the government has not regulated foreign investment in real estate effectively.
Who are the foreign investors? Around 63% identified Chinese as the majority of Sydney investors, which is likely given Chinese investment is concentrated in Sydney and Melbourne but within particular suburbs. Yet there is potentially public confusion distinguishing the Australian-Chinese buyers from Chinese foreigners.
There is also the view that Chinese investors are ‘super-rich’, perceived by 58% of respondents. However, National Australia Bank’s 2015 housing report shows that 53% of foreign buyers in NSW purchased properties under $1 million and the majority was Chinese. This supports an emerging new middle class in China that is increasingly buying property in domestic and international markets.
Australia has a long history of Chinese cultural tension that is also evident in other global cities including Canada. The Australian government has dealt with racism, immigration and land disputes for well over 200 years now. Currently, however, there is concern about cultural profiling and the stigma of Chinese investors in Australia.
“The skills and cultural contribution of migrants to Australian society are so often overlooked by an ingrained historical desire to achieve the great Australian dream of home ownership,” said Dr Rogers.