Yuan devaluation won't stop Chinese investments in Australian property
The unexpected devaluatation of the Chinese currency recently could drive an increase in the amount of money being invested in Australian property, industry experts believe.
While global markets recoiled in shock from the move by the People's Bank of China in mid August, property experts said that contrary to some forecasts the move would work in Australia's favour.
"I think it would start a new direction and it's going to bring more money out of China and offshore," one industry experts believe. "The Chinese yuan has been pegged to the US for long time and now we see a strategic change. How far the yuan will keep going down, we don't know. So the Chinese want to act quickly to get their money out."
"I expect mid August's monetary policy changes in China to encourage more investment in international domiciles, like Australia, that have a history of high quality with lower volatility investment performance," he said.
On 14th August, the three-day slide of the currency stopped at about 6.4003 a dollar after the PBoC said it would "intervene to prevent excessive swings". This was China's first major devaluation since 1994.
Managing director of capital markets investments, Johnson said the devaluation only had a small role to play in the bigger Chinese investment picture.
"We have devalued, they have devalued but more importantly the cost a square metre is still better in Sydney and Melbourne than it is in Shanghai and Beijing even with devaluation," he said.
"On a relative basis the Australian dollar has declined more, thereby resulting in a net positive economic effect as to purchase costs," ANZ's head of institutional property group, Eddie Law said.
"Most Chinese investors would perceive Australian property as being less likely to decline in value given comparable supply and demand metrics between tier one and two cities in China and Sydney and Melbourne. These are continuing safe havens for wealth preservation."
The "minor" yuan devaluation and Australia's "safe haven" status would keep funds flowing into the country, ANZ and Deloitte confirmed. Both companies were seeing a boom in business from China – better than 12 months ago.
Hundreds of clients; at least one group a week coming out from China to invest in property and projects.
He added Foreign Investment Review Board limitations on sales to Chinese buyers had caused enough pent-up pressure from excess demand to override any negative effects from the yuan.
One property expert said "nothing has changed this week" in China.
"If China's currency keeps falling, that could be a boon for Australia, leading to greater commercial, development and residential investment from China. In that situation, the weak Aussie dollar would be like an open door, beckoning investors in. Meanwhile, the strong US dollar would make that country less affordable for Chinese buyers on a budget,"
"In the unlikely event that the currency shift does affect consumer behaviour, Australia stands to benefit, as a relatively close destination than Europe or North America."
Souce Credit: AFR