Understand the effect “Chinese Buyers” have on your market and learn strategies to deal with it

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The Chinese Phenomenon – Case Studies

References:

1) Here is a link to a sample of 500 (Five hundred) homes we have bought recently – you decide if we are qualified to make the comments we are making http://www.james.net.au/homeratings/houses_bought.php?token=LJbnmFauW3

2) Here is a link to the 5000 (Five thousand) auctions we have reported on – you decide if we are qualified to make the comments we are making. http://www.james.net.au/auction-results

The ‘Chinese Phenomenon” in Inner Melbourne got a lot more intense 7 years ago when the government opened the floodgates to Asian by basically dismantling FIRB on second hand homes. The governments of both sides have since said they shut the gates – but they haven’t or can’t as so many Chinese bought in.

As many Australian homebuyers who want to send their to school at Carey, MLC or Scotch are aware; it has become very, very difficult for them to do that. Its not the high school fees.

No, they cannot send their children where they want to, because they cannot afford to buy a home within a bulls roar of the school of their . We know this, because we act for these buyers – we are finding homes – but it is very difficult.

There are clear no go precincts (financially) for second, third and fourth generation Aussies such as Scotch Hill, Sackville Ward, ’s Golden Mile. There are whole unaffordable near these schools, where its basically impossible to buy a home, unless you are Chinese or first generation Chinese Australian. The obvious are and North ; where we can see that for every 100 homes bought in the area 90 are bought by Chinese or Chinese Australians and the rest by companies (possibly Chinese), other Australians. There are more suburbs than just and North. These are Valuer General Statistics and our data.

So what effect does this have on the whole Eastern Suburbs of Melbourne – on real people who are not Chinese.

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Real Life Case Studies: Two recent successes for us in low percentage “Chinese Areas of ” – Canterbury and .

The importance of James Buyer Advocates profiling streets and precincts is to understand just how much of a chance the 20%+ Chinese bidding premium is a factor. By profiling streets, property types and precincts we can show our clients the likelihood of Chinese bidding – for instance a period home in Maling Road Canterbury has a lower likelihood of Chinese bidding than a knock down period home in Canterbury’s Golden Mile only a few hundred metres away.

Armed with this information both these homes were able to be bought outside the normal auction process at prices acceptable to our clients without the Chinese factor. Homes our clients wanted, near schools they wanted their children to go to. Its was not easy, but it was possible.

The issues for Aussies is partly the “Chinese Phenomenon” but its also partly now our MAJOR BANKS.

We’ve all heard about the Investor Premium banks are now charging Australian investors (of all backgrounds including Chinese Aussies). This makes Aussies less competitive against Chinese National Buyers; but now MAJOR BANKS are making life more and more difficult for Australians to buy homes to live in when bridging finance and higher LVR’s are involved. Prudent yes but NOT FAIR.

How does an Aussie trade up without a bit of stretch on an LVR and bridging finance in a rising market. Please tell us NAB, Westpac, CommBank, ANZ and others. We’ve heard complaints about all banks.

OK they don’t help, because it is not prudent. Agreed.

With prices climbing by 20%, 50% and so on in the last few years how do the banks and the governments expect locals to compete against the Chinese National money and the dollar dropping.

Whatever is going on, is grossly unfair to local Anglo Australians and local Asian Australians and locals……..

Please we give you examples. A client of ours was given a bank letter of approval, bought under the hammer at circa $1.5m and the banks would not accept that as a valuation, despite the letter. It was an auction – they still haven’t accepted it months later. For Pete’s sake how unfair is that on an Aussie battler. The banks deemed the at 10% less and this put great pressure on our client – despite the letter of approval. Their argument became their valuer and the data he used to arrive at that figure – that data was historical and six months old. Yeah and mate we are rising market and you have given a letter – what are our clients expected to do. Our client in this instance was not Chinese.

It was unfair banking – but hey it doesn’t stop at $1.5m. At $3m, at $4m, at $5m, at $8m banks have refused to assist Australians – doctors and so on buy homes at levels and in manners they deem inappropriate. We have had to suggest other alternatives.

Again is this a level playing field for Australians?

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Real Life Case Studies: Welcome to Scotch Hill and the power of the “Chinese Phenomenon” even when Chinese people don’t bid. This weekend’s 2 Crossakiel Court is a classic example of the Chinese hidden hand – in that even though Chinese people were not bidding, it was the fact that Chinese people had taken so many homes off the table, that the prices got to where they got on this one. We dipped our toe in the water at $3.1m prior to auction, which was a lazy $1million over what was paid just on 3 years ago – nothing done to the home. A polite but quick rebuttal told us what we already suspected – 2 Crossakiel was on fire – we sort of moved on.

At the auction we witnessed an Anglo Aussie downsizer? hidden in the crowd indicating to his agent to keep going – he was up against an Asian Aussie downsizer? and they slugged it out to over $4m – meaning this home had effectively doubled in 3 years. As nice and quaint as it was – the price was not a reflection of the home – it was a reflection of the prices paid by Chinese people on other homes on Scotch Hill this year.

Land has risen 20%, 30%, in some cases 40% in the last year– but equally as important, housing stock has been taken out of the market.

We could see this coming over the last five years and Scotch Hill, Grace Park, Maling Road, Sackville Ward have been the most prolific areas we have bought in for our high end clients – some of which you can see on our map.

Many have been off market, which are not listed on the map.

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Real Life Case Studies: You are a young couple trying to buy into the Studley Park Area of Kew as you love the quiet leafy green feel. Over the last 3 months

  • You have seen a home that was advertised over $2.5m sell, without any referral to you, to a Chinese person that didn’t have FIRB approval on Tuesday at $3.2m but miraculously according to the agent got FIRB approval on the Friday. You simply were not informed or given a chance– despite your pest and building inspections, contract etc and it was sold before auction.
  • You went to an auction in Raheen Drive to consider a property quoted at $1.8m and needing a major renovation and you watched two Chinese people bid and bid and bid and bid and bid past $2.65million.
  • Your advocate did due diligence on a home in Young Street this last Saturday on a $1.8 to $2m quoted property. This home needed a rebuild and was on the south side and with a big slope – it was an expensive rebuild. Your advocate had profiled the area and assessed the chances of Chinese bidding to be low as the area is profiled as less than 20% Chinese which in Kew terms is unusual and so we went to auction.
    At $2.15 million a Chinese person bid $2.53 million which we all thought was a mistake – despite her lack of English or seeming lack of English, the agents asked her to change her bid to $2.22m so as the auction could continue. A short time later she bought the home over $2.5million – it was no mistake and she wasn’t stopping.
    Our belief is she may have been a neighbor and that property sold for over $5m recently – we cannot confirm that however and that always throws out our James Chinese Buyer profiling.

At a coffee afterwards this James Buyer Advocate urged these really nice people to hang in there, as although its bloody hard, we will find a home for them that they can afford to buy. Their story in not unusual and it’s a matter of keeping on keeping on against the tide of Asian money.

Is it a level playing field for Australians and will it be impossible for our/their children to buy?

Here is a list of homes (500) we have bought recently – you decide if we are qualified to make the comments we are making

http://www.james.net.au/homeratings/houses_bought.php?token=LJbnmFauW3

Here is a link to the auctions (5000) we have reported on – you decide if we are qualified to make the comments we are making.

http://www.james.net.au/auction-results

Mal James

 

Doctors

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