Chinese investment laws target business acquisitions by foreign companies

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Supplied Editorial Adelaide CBD - city skyline

Adelaide CBD – city skyline

FIRST-HOME buyers will be the likely victims of new Chinese investment laws which target business acquisitions by foreign companies.

In its first ruling on overseas investment by Chinese companies, China’s State Council released a new banned list which includes the purchase of casinos and defence technology, while overseas property development and hotels are classified as “restricted”.

The ruling comes after reports Chinese companies bought 38 per cent of all residential property development sites in Australia last year, spending an approximate $2.4 billion, according to a report by Knight Frank.

Real Estate Institute of South Australia (REISA) President Alex Ouwens said Chinese investors played an important part in Adelaide’s rapidly growing unit market.

“The decision by the Chinese government to restrict property development, especially in South Australia, will create a loss of supply in the residential unit market,” Mr Ouwens said.

“Over the past five to 10 years, we’ve seen an increase in the building of apartments in the CBD which has benefited first homebuyers.

“If there are restrictions, it will mean less supply and if there’s less supply, that’ll usually point to an increase in price.

“While that may be good news for investors and sellers, it’s not good for homebuyers as the supply will tighten.”

China’s National Development and Reform Commission declared on Friday that the property sector was “not the real economy” and companies investing overseas in real estate could be harming China’s financial stability by increasing capital outflows.

It also labelled the overseas buying spree by China’s biggest private companies in recent years as “irrational” with companies that violate the foreign investment rules to be punished.

Mr Ouwens, who sits on the board of the Australia China Business Council, said the new laws would further soften Adelaide’s property market which was already feeling the effects of Australia’s tightened government regulations and taxes, imposed earlier this year.

“The South Australian government has voted to increase stamp duty (for foreign buyers) by a further four per cent, so if you’re a foreign buyer and will have to pay an extra 10 per cent, you’ll have to consider that when buying a property,” he said.

“That can be off-putting and I think, as a result, we’ll see further decreases in foreign property investment.”

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