Chinese buyers mean rate rises won’t burst housing bubble: UBS
19 May 2014
The rising influence of Chinese investors in the Australian property sector means the Reserve Bank of Australia has lost its ability to use the official interest rate as a tool to protect Australian investors against the risk of a housing bubble, UBS regional chief investment officer Asia Pacific Kelvin Tay told a luncheon crowd in Sydney recently.
"Chinese buyers won't be deterred by marginally higher interest rates," the investment strategist said. "They are buying properties with mostly cash.
"Australia has had a spate of robust capital city housing data in recent months, but Chinese buyers have been pushing prices up.
Rate hikes will now be an ineffective tool to push down property prices and that is why UBS does not think the RBA should do it.
Instead, Australia should consider introducing other regulatory reforms designed to mitigate the risk of a housing bubble, he said."Australia should follow the lead of jurisdictions like Hong Kong that have successfully introduced tax reforms that target people who buy and sell investment properties," Mr Tay said.
Mr Tay predicted the world's biggest economy, the US would grow about 3.4 per cent this year and that US Federal Reserve would conclude its program of quantitative easing in October.
He tipped the world's second largest economy, China, to make its official target of 7.3 per cent to 7.4 per cent growth.