Most of the promoted price growth, of late, is mostly taking place in Sydney and Melbourne.
Many are trying to couch the reasons behind this price growth – lower interest rates, federal election outcome, improved housing affordability, some loosening in loan servicing, rising auction clearance rates – in terms that would influence all housing markets, not just Sydney and Melbourne.
For mine, just like the previous price surge, the main reason for the current promoted heat in the Sydney and Melbourne housing markets is due to Chinese buying and much of that money is coming from overseas.
This, in turn, has sparked, again, local FOMO (fear of missing out).
Notably any gains that have been actually made are localised to trophy suburbs and within these areas, prized homes.
China’s hidden capital flight surged to a record high in the first half of this year, suggesting that residents wanting to move money abroad are using unrecorded transactions to evade tight capital controls. Much of this money finds its way into overseas housing. Sydney and Melbourne are target cities.
The “net errors and omissions” in China’s balance of payments – widely seen as an indicator of concealed capital flight – rose to a record high of $131 billion in the first six months of this year. And it is estimated that this amount could exceed $300 billion for calendar 2019. Another record.
It is little wonder given the recent events in Hong Kong and across mainland China.
Also, a large part of the Chinese culture is about saving face and perception. They aren’t really interested in second tier cities, let alone in a regional town or a suburban based municipality.
It is their perception of a prime location and property that matters. This trend is evident elsewhere in the world.