SYDNEY - Chinese demand for Australian residential property has eased because of tighter capital controls imposed by Beijing and tougher restrictions on mortgage lending by local banks, a top central banker said on Monday.
The Reserve Bank of Australia's (RBA) head of financial stability, Jonathan Kearns, said foreign buyers accounted for around 10 to 15 per cent of new construction, or about 5 per cent of total housing sales and around one-quarter of newly built apartments.
"Many foreign buyers come from China, seemingly around three-quarters," Kearns said in a speech to an Australia-China property conference.
"Purchases of new properties by foreign buyers have eased over the past year, reportedly because of stricter enforcement of Chinese capital controls and tighter access to finance for foreign buyers." Offshore demand for property has become a contentious issue amid sky-high house prices and complaints locals are unable to afford a first home.
Yet, Kearns said foreign demand did not reduce the supply of available dwellings overall and might actually drive the expansion of new supply.
Foreign buyers in Australia for work or study would have been renting if they did not purchase, while other foreign buyers rent the property as an investment and so contribute to the rental stock, he said.
Also, there were some new developments that only proceeded because they got high pre-sales from offshore.
Kearns said the central bank was keeping a careful eye on loans for property development, particularly in the commercial and apartment sectors, where rapid growth in lending by foreign institutions had helped bid up prices."
The run up in commercial property prices raises the risk of a sharp correction, for example if there is a change in sentiment or a pick-up in long term interest rates," he said.
Unlike in some past construction cycles, Australian banks had not eased their lending standards and instead had generally tightened requirements for commercial property in recent years.
That had left the door open for Asian banks which had doubled their market share of Australian commercial property in the past couple of years, he said.
While valuations for some apartments at settlement were lower than the purchase price off the plan, there had not been widespread reports of higher rates of settlement failure or any notable increase in arrears or losses for banks, Kearns added.