AS OIL prices suffered more sickening blows this week, and iron ore and coal languish, only one force stands between Australia and a serious recession — Chinese investment in our residential property market.
And in time that investment will move more heavily into other areas, particularly agriculture and tourism.
I’ve already looked at some of the local and global side effects of the oil slump, so today it’s appropriate to note that the Chinese boost to investment in real estate is a global phenomenon.
Whether it be London, New York, Melbourne or Sydney, housing markets have never seen anything like the current rash of Chinese and Asian buying.In cities such as London and New York the buying melds into the total scene, but in Australia’s two largest cities, Chinese investment has come to dominate the market.
In Australia, the construction activity that comes with that Chinese investment could not be coming at a better time, given the mining investment recession. If we take a broad definition, the construction industry is close to the country’s biggest non-government employer.
We may once again be the lucky country.
Many of the Chinese who are investing in Australia see Melbourne and Sydney as the new Hong Kong. And this view has multiplied in intensity given the efforts by China to tighten control over Hong Kong.
At the moment, some of the Chinese investors are planning a slowdown for the early months of 2015 but this will be temporary and they will be back with force.
Clearly, one of the motivations behind David Murray’s recommendation that banks lift their equity backing for housing loans is inspired by the fear that the Chinese might one day exit and send property values spiralling down.
The Chinese tell us that this is highly unlikely. One possible course is that Australia will curb overseas house buying and dwelling investment and make visas much harder to gain — a path taken by Canada.
But that too is unlikely. To put it simply, during the middle of the mining investment boom we did not need Chinese investment, but now we do.