Chinese Demand Inflating Australian Property Prices

CS - Market Talk

According to Credit Suisse, Growing Chinese demand for Australian residential property should keep inflating prices here, even though Australia already has some of the highest price-to-income ratios in the world, according to Credit Suisse. The broker says Chinese nationals are already buying more than A$5 billion (US$4.48 billion) of Australian residential property a year--accounting for 12% of new housing supply--concentrated in Sydney and Melbourne. It estimates that the number of Chinese who can easily afford to buy an apartment in Sydney will rise 30% to 1.43 million by 2020. "This should support a further A$44 billion of Australian residential property purchases over the next seven years," Credit Suisse analysts Hasan Tevfik and Damien Boey say in a report. "As long as Australia remains open for business, our companies should also benefit from the next stage of China's economic development." Companies that should continue to benefit from this theme include developers, building material companies, property websites and banks, the strategists say. They don't discount the possibility of a Chinese entity taking over one of these companies. Based on this view, Credit Suisse has added Fairfax Media (FXJ.AU) to its model portfolio, which already includes Mirvac (MGR.AU), CSR (CSR.AU) and National Australia Bank (NAB.AU). (david.rogers@wsj.com)

Contact us in Singapore. 65 64154 140; MarketTalk@dowjones.com