First-home buyers in Adelaide may be hurt by the Chinese government’s recent crackdown on overseas investment.
China’s State Council has announced new laws which ban the purchase of casinos and defense technology and classify overseas property development and hotels as “restricted.”
Real Estate Institue of South Australia (REISA) President Alex Ouwens warned that the changes would have a particularly strong effect on Adelaide’s rapidly growing unit market.
“The decision by the Chinese government to restrict property development, especially in South Australia, will create a loss of supply in the residential unit market,” he said. “Over the past five to 10 years, we’ve seen an increase in the building of apartments in the CBD which has benefited first homebuyers.
“If there are restrictions, it will mean less supply and if there’s less supply, that’ll usually point to an increase in price. While that may be good news for investors and sellers, it’s not good for homebuyers as the supply will tighten.”
Ouwen’s analysis was echoed by REA’s chief economist Nerida Conisbee, who said the new laws will negatively affect first-home buyers in Sydney and Melbourne.
“Both cities are really starting to see a slowdown in prices already and I think with less supply in the market it will mean prices will not stabilise as much as people are hoping,” she told News Corp.
She also warned that the lack of supply wouldn’t be great news for buyers looking to enter the market for the first time.
In an attempt to cool the market, the Australian government also introduced changes this year.
In the 2017 Budget, increased taxes and charges were created for foreign investors, including a “ghost tax” on residential properties left vacant for more than six months of a year.
Although Chinese investment on foreign property is still touted to crack $AUD 100 billion this year, it will be a decline on the record-breaking $AUD 126.6 billion that was spent in 2016.