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Chinese buyers bolstering Sydney luxury property
Brief:Sydney’s real estate agents were celebrating this week after a Mosman waterfront property – which had been sitting on the market for three years – sold for what was the second highest price this salubrious North Shore suburb has seen so far this year.
According to the selling agent, two buyers – a Sydneysider and a buyer from China – ended up vying for the property, which helped push the price above the $11 million mark. And although in this case the local won out, Sydney agents are deeply aware that mainland Chinese buyers are providing a welcome boost for the languishing top end of the Sydney property market.

Sydney, of course, isn’t alone. Chinese buyers are helping to drive up the price of Hong Kong’s luxury apartments, and are emerging as key players in property markets as far afield as London, Singapore, San Francisco and Melbourne.

There are two reasons why Chinese buyers have become increasingly interested in acquiring offshore assets such as property. In the first place, there’s mounting concern about the Chinese economic outlook, particularly now that exports are clearly slumping. At the same time, Chinese buyers also see their offshore property purchases as a handy insurance policy, in case of rising political instability in their homeland.

Now this massive inflow of funds has stopped. According to figures released by China’s central bank this week, Chinese banks were net sellers of 3.8 billion yuan ($597 million) in foreign exchange last month, a clear sign that investors are pulling funds out of the country, and that some exporters are choosing not to convert their foreign exchange earnings into yuan.

But the pick-up in hot money outflows is also having an impact on Chinese asset prices. There’s little doubt that the huge capital inflows over the past decade played a major role in pushing Chinese real estate and equity markets higher. Now that they’ve changed course, Chinese asset prices are deflating. The Shanghai Composite Index is down 17% compared with a year ago, while Chinese house prices remain under pressure.

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