Suitcases full of cash… why Melbourne is booming

Seems that Melbourne has become the focal point of the Chinese buy.

While the other Australian capitals have seen waning interest from Chinese buyers, Melbourne is growing in favour, and Chinese buyers are going to great lengths to get into the market.

This chart here from the NAB survey shows that foreign buyer demand, as a share of total demand is falling everywhere except Melbourne.

In Melbourne, foreign buyers (and that’s probably mostly Chinese buyers) still account for around 9% of demand for established homes.

That’s almost one in ten.

If we look at the share of enquiries on Chinese language portal Juwai, we can see that Melbourne is starting to streak ahead.

Melbourne now accounts for 40% of enquiries. Sydney barely rates 17%.

And now The Australian is reporting that Chinese buyers are smuggling cash into the country in suitcases in order to buy into Melbourne property and avoid tightening capital controls back home:

Chinese investment will continue to flow into Australia’s housing market despite tighter mainland capital restrictions, with real estate portal Juwai predicting levels will peak again despite a near-10 per cent fall in inquiries earlier this year.

Inquiries on the website for Australian property from potential Chinese buyers have fallen 9.7 per cent in the first half of this year compared with the first six months of 2016, according to a Juwai.com spokesman.

“It’s down on last year, but it’s still going to be the second or third biggest year (for inquiries),” the spokesman said.

“It’s like going through the foothills – there are more peaks ahead.”

The comments come as Bloomberg reported that capital restrictions on money flowing out of the country had not stemmed Chinese interest in offshore investment. It quoted a Shanghai restaurateur saying he planned to carry money to Melbourne in a suitcase so he could buy a local investment property.

Shanghai restaurateur David Hu said he was nervous about wiring money to Australia for a home purchase because of China’s crackdown on currency outflows, Bloomberg reported.

The 61-year-old told the news agency that he intended to carry about $85,000 to Melbourne this month in a suitcase. The money was final payment for a deal struck last year.

“Buying a property abroad was and is still workable,” said Hu, though he described the process as a “lot more troublesome” these days.

Chinese applying for $50,000-a-year foreign exchange quotas must sign pledges that the money won’t be used for real estate. The regulation was brought earlier this year….

To me this all just reaffirms that Australia real estate is still a very attractive prospect to global investors. It has been for a while. It should be for a while to come, unless something crazy happens.

The interesting thing here though is the switch from Sydney to Melbourne. Obviously I can see the appeal of Melbourne, but it makes me wonder why it’s now currying more favour with the Chinese, relative to Melbourne.

Perhaps cheaper entry price points mean their investment dollars go a little further.

In the short term, you’d have to think that Melbourne prices will continue to outperform Sydney. That’s what the data seem to be saying.

And prices will just keep pushing higher and higher.

Chinese buyers active in your part of Melbourne?

Spiro Kladis
Managing Director, Cashflow Capital

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  1. ronald goddard
    2 months ago

    hi spiro,

    wow omg! and heck whats going on here? my favourite city..under siege from the overseas locusts..sorry asian buyers. they are ok..just like us.

    people here complain about overseas buyers. why??? if the government allows such goings on..well complain to them not the buyers. it seems self defeating to complain about anything that is legal.

    i will bet if any one of us was allowed to buy property(land included) in say thailand or cambodia, we would have a ‘landrush’ like never before. oz buyers would be lining up for a grab.

    good article spiro. investors want to use their money wisely and melbourne is a pretty good port. obtw we in perth are languishing somewhat in the real estate market. seems that nobody wants to live here anymore lol

    keep up the good work,

    ron from west oz.