mushez
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Any market, Housing market included - has a lot of value attached through ones confidence in it - a lot has happened this year to put a lot of water on the confidence in the Australian market to Chinese investors - and once they turn off the idea that investing in Australia is a good idea, nothing is going to turn them back on in a hurry - and walking away from settling the thousands of contracts on apartments waiting for completion and settlement.
I think they get 6 weeks from the fact the 1st October is in 3 weeks, and 3 weeks after that the horse might have bolted in confidence.
One needs to understand this is not new news, and for those who have not read about it prior - here roughly is what is going on:
Chinese foreign investors need to buy new in Australia - many are attracted to Apartments in the CBD's - and buy them off the plans. Many come here and sign up for apartments off the plan, with most to settle 2 years later upon completion, so in 2014 you had Chinese coming here and signed up for apartments off the plan to settle in 2016, some came in 2015 and did deals to settle 2017, and some early 2016 to settle in 2018.
When they came to sign up for the apartments, that have not yet been finished, in the past two years, they had a vague acceptance of getting 90% finance from a/the banks - and required a 10% deposit. So lets say $400k apartment, so they pulled $40k out from China to put down at the time of signing, and let it be thinking they didn't have to worry until setting day as the bank would finance the other 90%.
What has happened - is this year the Australian Banks have pulled the carpet of any foreign investor into property - requiring more paperwork - as they have found 80% (off top of my head what I have read) of loans given to Chinese in the past are on bogus papers and often to a person that does not exist - as they don't want to look silly when the China bubble bursts (China is a whole other ball game). But this aspect is not that hard for most Chinese, just is a few more hours work.
But the main thing the banks also did this year, is move all lending to qualifying overseas investors to being 50%, down from 90% previously. So for Mr. Wong who signed up for an apartment back in 2014, which is settling tomorrow - instead of having to have the $40k (10%), he now needs 50%, aka $200k - so is needing to find another $160k somehow.
In theory this isn't an issue, as he has this available to him in China.............. however China has restricted the ability to take cash out of China for investment to $50k PA per person, so Mr. Wong cannot get his $160k out of China right now to settle his new apartment. This has a lot of Chinese borrowing through 2nd and 3rd tier lenders to get this 50% deposit requirement of settlement - and most but not all settlements have been happening this year - with the balance of them going onto the market and clearing as if they are mana from heaven because normally you have to wait 2 years to buy a new apartment off the plans.
And then 1st October, will see State Governments of QLD add 3%, NSW 4%, and VIC move from 3% to 7% extra property transaction tax over and above all other taxes. Another needle that might break the camels back. So Mr. Wong needs say another 4% to cover this extra tax if he is to settle next month - that is $16k on his $400k apartment.
Also there is word that the 2nd and 3rd tier lenders who have stepped in so far this year, cannot continue. So deals coming up for settlement will simply fall over as there is no options for them to settle. Once there is too much inventory trying to be cleared in the market, and people take losses on them and prices come down, more and more Chinese will walk away from current deals and their 10% deposit as that is the cheaper option for them. Well that is the theory anyway.
And why are Chinese investing in Australia + NZ & Vancouver property? And why under bogus names? Because they know the Chinese bubble will burst at some point. So Dad in China is borrowing and leveraging himself up as much as he can, and getting what he can out of China (why China has put the $50k limit in), to invest outside of China as an insurance to the crash that will happen in China. But Dad in China doesn't want it in his name, as he is expecting to default on everything in China, so he is putting it in a bogus name in Australia, or if he is forced to put in a name, his son's or daughters name. His hope is when it goes to custard in China, he has a nest egg outside of China that he can escape China to if and when things so south - and if they don't go south, they hope and expect the value of their overseas investment to continue to increase and more than cover itself in capital gains for the interest paid on debt. It is their bet both ways.
