How might the recent China stock market decline be good for Australian residential property?

The recent Chinese stock market fall caused media outlets to sound the alarm bells for Australian investors. Now that the dust has settled from the hype, could these events and resulting future outlook eventually be a good thing for property investors? Potentially so.

Let’s take a look back at 1987.

This was the biggest sharemarket plunge in our history and the only asset that boomed was property. It actually took 19% interest rates to slow it down. We are currently far from those days sitting at a nominal 2%, and it’s not certain as to when the RBA will move in an upward direction anytime soon.

One thing that IS certain, China has played a part in the growth of residential property right here in Melbourne. Chinese stocks lost over $3.7 trillion in the space of a month starting in late August. Let’s repeat that, $3.7 trillion.

These certainly are worrying times indeed for the Chinese stock investor. However, the Chinese are also seasoned property investors. In previous years the overheated housing market in China was a concern and the Government’s approach shifted to promoting their stocks. Now with stocks falling, this new development could fall directly into the Australian property market’s hands.

Why?

Chinese investment in Australian property continues to grow year on year, and shows no signs of slowing down particularly now as stock investors will want to move their money into more stable and affordable assets such as Australian property.

The outlook.

Chinese investors are set to inject over $60 billion into Australian real estate in the next five years. A considerable amount of this will be in affordable growth suburbs in Melbourne, the “world’s most liveable city” and not quite as pricey as Sydney. Further the Australian dollar is set to continue falling, which will be a massive driver making foreign investment cheaper.

Chinese investors may well flock at an increasing number than ever before because it makes financial sense. If you were residing in an overheated market with no potential of price growth and had the opportunity to invest into a booming market at half the price, wouldn’t you?

Smart investors may consider their currently portfolio or starting one altogether, to ensure they do not miss out on potential further growth driven by the Chinese investor.

Written by Arthur Vlanes, 2014 National Adviser of the Year, Yellow Brick Road.