Money Laundering or Investment? Chinese Buy Oz Property

What is capitalism? What is state-driven capitalism? The blurred distinction between the two gives rise to now-frequent crackdowns on Chinese businesspersons during Xi Jinping's current drive to supposedly reduce corruption in the PRC. Unless you're a die-hard Marxist--property is theft, more so in a "Communist" state--the distinction isn't so clear. In an earlier post, I described how many Chinese are hedging their bets by seeking residences abroad should the purge in China reach Cultural Revolution proportions. While that's a remote possibility, you never know.

Apparently, one of the choice destinations for the Chinese is Australia. Closer than Europe or North America, it is still relatively affordable. Throw in a large and growing Chinese communities in several destinations and you have an attractive deal:

More wealthy Chinese are moving their money out of China to invest in Australia's property market as a corruption crackdown in the world's second biggest economy gathers momentum, property consultants and lawyers said. They said their clients had told them they had legitimate funds to invest but were concerned about being caught up in an investigation, which in China often delves into the affairs of dozens of associates of the main target, and losing that wealth.

"What we see at the moment is that there are more Chinese who would likely send more money out of the country so they don't get caught up in this crackdown," David Green-Morgan, global capital markets research director at real estate servicesfirm Jones Lang LaSalle (JLL), told Reuters.

We're not talking about trifling sums here, either:

Australian property has long been a popular choice for Chinese money - both legitimate and illegitimate - but the flow of investment appears to have accelerated of late.

According to Australia's foreign investment review board, China was the No.1 source of foreign capital investment into Australia's real estate in 2013. It received approvals to invest nearly A$6 billion ($5.58 billion) into the sector, up 41 percent from a year ago. "They are worried so they are looking for a safe place," said a Sydney-based immigration lawyer, who is advising on setting up a new fund exclusively for Chinese investors and regularly travels to Beijing and Shanghai. "They don't want returns, not necessarily. They want a safe place," he added.

China is expected to see an annual growth of 20 percent in outbound real estate investment in the next decade, up from $11.5 billion last year, property agent Savills has forecast.
That will help push Chinese demand in Australian property by 15 percent over the next 12 months, said Andrew Taylor, co-CEO of Juwai.com, the largest real estate portal that targets Chinese buyers looking abroad.

Meanwhile, the commercial bonanza is on:

Chinese property developers have been aggressively investing abroad to cater to domestic demand and to diversify their assets in response to a cooling property market at home.

Hong Kong-listed Wanda Commercial Properties has set up a $1.6 billion fund to invest in Australian real estate, while China's Greenland Holding sold every apartment in a Sydney project last year within the first three hours for a total of 2 billion yuan ($325 million).

Century21 and Fairfax Media's Domain.com, Australian real estate portals, have launched Chinese language websites, and REA Group recently announced that SouFun, a major real estate online marketplace in China, would carry Australian listings.

Murdoch's The Australian has another angle on this story focusing on the attractiveness of suburban homes near top universities. Nevertheless, there's no doubting the new force in offshore real estate investment regardless of the "legitimacy" of the source.