Loss of Chinese buyers: final straw for Australia’s property market?

A mix of Covid-19, falling immigration and a mismatch in supply and demand are proving a toxic mix for property in Sydney and Melbourne

To top it all off, interest from Chinese buyers has slumped as the relationship between the two countries sours

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Properties on the Sydney coastline. Photo: Reuters

Published: 6:00am, 20 Jul 2020Updated: 6:21am, 20 Jul 2020

Australia’s property market, like many others around the world, has been hit by the coronavirus-induced economic downturn. But for its two largest cities, Sydney and Melbourne, Covid-19 is only part of the problem.

In these cities, a mix of stresses that include falling immigration, disparities in supply and demand and a decline in foreign investment due in part to tensions between Beijing and Canberra, are fuelling fears that the worst is yet to come.

For the past two decades, Australia has been experiencing a building boom. More than 700,000 apartments, flats or units have been built nationwide since 2001, according to the Australian Bureau of Statistics.

Until recently, demand has kept up with the increasing supply as Australians from the regions have flocked to the cities, alongside international students and other arrivals from abroad.

But this appears to be changing. More people are now moving in the opposite direction, leaving the capital cities for the regions, according to a report by the Regional Australia Institute last month. It is a trend that was gaining momentum even before the pandemic, but is now accelerating, according to the institute’s chief executive Liz Ritchie.

Cranes work on a building site in Melbourne’s central business district. Photo: AFP

“Over the last few months, we’ve all had to change how we work, and this has allowed staff and employers to see that location is no longer a barrier for where we choose to work,” Ritchie said.