The retreat of Chinese developers from Australian real estate could make it even tougher for first-home buyers trying to break into the pricey Sydney and Melbourne property markets, according to Nerida Conisbee, chief economist at REA Group. 

Conisbee said there would be less residential development because the Chinese government recently announced it would restrict Chinese investment into overseas property development, issuing a new list of “banned investments,” including casinos and defence technology, while overseas property development and hotels were classified as “restricted”.

Chinese developers and investors purchased $2.4bn worth of Australian residential development sites last year, which made up 38% of all the residential property development sold in Australia in 2016, according to a report from Knight Frank. 

The impact of these new rules is already being felt in Australia. “Both [Sydney and Melbourne] are really starting to see a slowdown in prices … and I think with less supply in the market, it will mean prices will not stabilise as much as people are hoping,” Conisbee said. “If the level of supply kept up, I do think a slowdown would have led to a possible reduction in prices — but this will continue to support price growth in Melbourne and Sydney.”

Conisbee said the Sydney market would be more severely affected, as supply and demand were more balanced in the Victorian capital. 

The percentage of Australian development sites sold to Chinese companies has already dropped, from about one-third in 2016 to just 11% on the year-to-date. 

“It could get harder if you’re a first-home buyer and you’re looking to buy an apartment. Fewer apartments being built is not going to make it any cheaper for you, so this won’t help [with] affordability,” Conisbee said. 
 

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