Wong

The Drivers of Overseas Investments in the
Australian Residential Property Market
A thesis submitted in fulfilment of the requirements for the degree of
Ph.D. (Built Environment)
Peng Yew Wong

Graduate Diploma Business System Monash University
Bachelor of Economics (Accounting) Monash University
School of Property Construction and Project Management
College of Design and Social Context
RMIT University
July 2016
Declaration
I certify that except where due acknowledgement has been made, the work is that of the author alone;
the work has not been submitted previously, in whole or in part, to qualify for any other academic
award; the content of the thesis is the result of work which has been carried out since the official
commencement date of the approved research program; any editorial work, paid or unpaid, carried out
by a third party is acknowledged; and, ethics procedures and guidelines have been followed.
Peng Yew Wong
16th September 2016

The Drivers of Overseas Investments in the Australian Residential Property Market
ACKNOWLEDGEMENT
First and foremost I wish to thank my supervisor, Associate Professor David Higgins for his invaluable
guidance, advice and assistance for my entire doctoral study. The moral support provided by him
was instrumental in overcoming hurdles and challenges during the research. Dr. Higgins industry
connections were a significant contributing factor in speedy research data collection. His insistence
in pushing research boundaries, combined with his motivational supervision had made this research
journey most interesting.
It goes without saying that I owe a special gratitude to my co-supervisor, Professor Ron Wakefield,
for his out-of-the-box thinking and insightful comments and support throughout the research.
Special tribute is hereby made to his wisdom in providing different lines of attack to resolve my
research headwinds.
I am grateful to RMIT University and the Australian government for the sponsorships and technical
support that made this doctoral study possible. I thank Professor Kerry London for her meaningful
introduction to the world of research philosophy and support throughout my research candidature. I
appreciate the guidance of my review panel member Associate Professor Guillermo Aranda for his
advice on life within and outside the research journey. I would like to acknowledge the kind
assistance of Dr. Judith Callanan, Dr. Wejendra Reddy and Ms. Jane Simpson for sharing their
knowledge and assistance on my research and teaching works in the University. I also appreciate the
support provided by the staff and fellow Ph.D. colleagues at RMIT Universitys School of Property,
Construction and Project Management.
The nature of research entails wide coverage of industrial perspectives that require support from
industry personnel. These are significant contributors to the success of the research outcomes. I
thank Mr. Tony Crabb (Savills) and Ms. Petra Sprekos (REIV) for assisting with industry networking
and data collection. I would also like to acknowledge the support of the many Australian and
Chinese real estate leading professionals who contributed insightful standpoints and perspectives in
the semi-structured interview research phase. Their expert advice and recommendations were
valuable in shaping this research and were significant in result validation.
Lastly, I sincerely appreciate the support, patience and understanding of all my family and friends
tolerating all the inconveniences during my Ph.D. candidature. My gratitude goes towards my
beloved wife Poh Lay and my two daughters Chloe and Ryann. This thesis would not have been
possible without their unwavering support, love, encouragement and tolerance. Poh Lays
contribution in proof reading my thesis and presentation materials always came in handy when I
needed it the most. All three of them were the targets of crazy ideas or tough issues, for which I
cant express enough gratitude.
To all, I thank you for your support, guidance and encouragement. It has been a journey and it is
greatly appreciated.
Peng Yew Wong

Table of Contents
LIST OF FIGURES ..................................................................................................... iv
LIST OF TABLES ....................................................................................................... vi
ABBREVIATIONS AND ACRONYMS ........................................................................ vii
ABSTRACT .............................................................................................................. x
CHAPTER ONE: INTRODUCTION
1.1 Background.....1
1.1.1 Global Wealth and Foreign Direct Investment..2
1.1.2 Sources of Funds and Residential Property Market......7
1.1.3 Foreign Investment in Australian Residential Real Estate..14
1.2 The Statement of Problem.23
1.3 Aims and Objectives.....26
1.4 Research Design....28
1.5 Significance and Scope..30
1.5.1 Significance.. .....30
1.5.2 Scope and Limitation ...33
1.6 Thesis Outline.....34
1.7 Publications and Presentations34
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction .36

2.2 International Investment Fundamentals..37
2.3 Overseas Residential Property Market Investment Determinants.40
2.3.1 Factors Attributable to Foreign Investments in the Property Market 40
2.3.2 Local and Overseas Government Property Market Policies .44
2.4 Population Growth and Offshore Investments49
2.5 Migration and Real Estate Markets54
2.6 Emerging Foreign Investment Trends.56
2.6.1 Classes of Private Wealth56
2.6.2 Residential Tourism.63
2.6.3 Education and Migration.70
2.7 Summary and Implications..73
CHAPTER THREE: RESEARCH DESIGN
3.1 Introduction76
3.2 Research Design.77
3.2.1 Research Approaches77
3.2.2 The Model.79
3.3 Methodologies.81
i
3.4 Data Collection Strategy86

3.5 Sampling Technique.88
3.6 Stage 1: Quantitative Research90
3.6.1 Data Sources.90
3.6.2 Data Analysis94
3.7 Stage 2: Qualitative Research Phase..101
3.7.1 Semi-Structured Interview101
3.7.2 Qualitative Analysis.105
3.8 Summary..105
CHAPTER 4: STAGE 1 QUANTITATIVE ANALYSIS
4.1 Introduction..108
4.2 Melbourne Population Overseas Settlers108
4.3 Melbourne Residential Property Market Performance.115
4.4 Melbourne Residential Property Market Performance Determinants119
4.4.1 Correlation Matrix120
4.4.1.1 Melbourne Metropolitan Residential Property Market..120
4.4.1.2 Clayton Residential Property Market124
4.4.1.3 Doncaster Residential Property Market.127
4.4.2 Stepwise Regression129
4.4.2.1 Melbourne Metropolitan Residential Property Market131
4.4.2.3 Doncaster Residential Property Market..136
4.4.3 Discussion ..138
4.5 Melbourne Residential Property Market Performance Non-traditional
Determinants.140
4.5.1 Correlation Matrix Including Non-traditional Determinants.140
4.5.1.1 Education International Student Enrolments..140
4.5.1.2 Residential Tourism143
4.5.2 Stepwise Regression Including Non-traditional Determinants.147
4.5.2.1 Melbourne Metropolitan Residential Property Market147
4.5.2.3 Doncaster Residential Property Market.152
4.5.3 Discussion and Summary154
4.6 Overseas Determinants China Factors156
4.6.1 Descriptive Correlation Analysis.158
4.6.1.1 Melbourne Metropolitan Residential Property Market..158
4.6.1.2 Clayton Residential Property Market...161
4.6.1.3 Doncaster Residential Property Market..164
4.7 Summary Key Points.166
4.7.1 Overseas versus Local Determinants. 167
4.7.2 Education 168
4.7.3 Residential Tourism 168
4.7.4 China Factors 170
ii
CHAPTER 5: STAGE 2 QUALITATIVE RESEARCH
5.1 Introduction172
5.2 Offshore Investments in the Australian Residential Property Market..172
5.2.1 Offshore Investors Large Scale Projects and Private Investments.174
5.2.2 Local versus Foreign Investors and The Australian Brand Presence..176
5.2.3 Local Determinants and Offshore Drivers180
5.3 New Determinants.183
5.3.1 Education183
5.3.2 Residential Tourism.189
5.3.2.1 The Emerging Driver Residential Tourism.189
5.3.2.2 Residential Tourists Characteristics194
5.4 Government Policies.200
5.4.1 Push Factors..200
5.4.1.1 Sources of Push Factors Wealth Accumulation and Chinas One-
Child Policy.202
5.4.1.2 Primary Push Factor Chinas Going-out Policy206
5.4.1.3 Secondary Push Factor The Major Capital Deflector Phenomenon
of the Decade..211
5.4.2 Pull Factors Australian Government Policies..216
5.5 Discussion and Summary.219
CHAPTER 6: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
6.1 Introduction224
6.2 Summary..225
6.2.1 Objective I and II: Historical and Emerging Determinants..226
6.2.2 Objective III: Dynamics of Overseas Investments..233
6.2.3 Objective IV: Key Onshore and Offshore Government Policies238
6.3 Contribution to Body of Knowledge..241
6.4 Recommendations.244
6.4.1 The Brand Presence Most Liveable City....244
6.4.2 Residential Tourism and Australias Tourism Industry.245
6.4.3 Education.248
6.5 Areas of Further Study.250
Appendices..254
References268
iii
LIST OF FIGURES
Chapter 1 : Introduction
Figure 1.1 Top 20 Host Economies for Foreign Direct (Inward) Investment in 2012 2
Figure 1.2 Top
Top2020Host
HostEconomies
Economies
forfor
Foreign
Foreign
Direct
Direct
(Inward)
(Inward)
Investment
Investment
inin
2013
2013 3
Figure 1.3 World Real Estate Value 5
Figure 1.4 Australian Residential Property Value 6
Figure 1.5 Corporate Investment in Global Real Estate 7
Figure 1.6 Private Wealth Investment in Global Real Estate 8
Figure 1.7 Cross-Border Capital Originating From China and Hong Kong 9
Figure 1.8 World Economies GDP in 2007 and 2050 12
Figure 1.9 Share of Global GDP by Middle Class 13
Figure 1.10 Residential Real Estate Approvals for Foreign Investors 15
Figure 1.11 Average Value of Residential Estate Approved 17
Figure 1.12 Australias Population Growth in Annual % Change 19
Figure 1.13 Population Drivers in Australia 20
Figure 1.14 International Students Enrolment in Australia 21
Figure 1.15 Conceptual Mapping of Private Wealth Real Estate Investments 25
Figure 1.16 Research Framework 28
Figure 1.17 Private Wealth in World Real Estate Markets (by number of 30
transactions)
Chapter 2: Literature Review

Figure 2.1 Archer and Ling Three Markets Model 47
Figure 2.2 Proposed Push & Pull Model 48
Figure 2.3 Components of Australias Population Growth 50
Figure 2.4 Australias Population from 1901 to 2011 51
Figure 2.5 FDI by Financial Year, as a Share of GDP in Australia 53
Figure 2.6 Largest High Net Worth Individuals (HNWIs) by Country, 2015 57
Figure 2.7 The Emerging Middle Class 62
Figure 2.8 Tourist Holiday Arrivals , VFR versus Permanent Settlers to Australia 65
iv
Chapter 3: Research Design and Methodology

Figure 3.1 Research Design Model 78
Figure 3.2 Property Market Structure: The Push & Pull Model 81
Figure 3.3 QUAH -> QUAL Sequential Explanatory Research Design 84
Figure 3.4 Proposed Research Approach: Explanatory Design Participant 85
Selection Model
Figure 3.5 Mixed Methods Data Collection Strategies 86
Figure 3.6 Analysis of Overseas Settlers Favourite Suburbs 95
Figure 3.7 Effective Communication Channels with Offshore Investors 103
Figure 3.8 Interview Plan for Leading Property Professionals 104
Chapter 4: Quantitative Analysis

Figure 4.1 Migrants in Australia by Country of Birth 2001 and 2011 111
Figure 4.2 Migrants in Melbourne by Country of Birth 2001 to 2011 112
Figure 4.3 Percentage of Migrants in Melbourne by Suburb 2011 113
Figure 4.4 House Prices Trends in Australia, Melbourne Metropolitan, Clayton 116
and Doncaster
Figure 4.5 House Price Movements in Australia, Melbourne Metropolitan, 117
Clayton and Doncaster
Figure 4.6 Melbourne Metropolitan House Prices Calculated Based on Regression 132
Equation
Figure 4.7 Clayton House Prices Calculated Based on Regression Equation 135
Figure 4.8 Doncaster House Prices Calculated Based on Regression Equation 137
Figure 4.9 Comparison - Melbourne Metropolitan Actual House Prices and Two 148
Regression Forecasting Models
Figure 4.10 Comparison - Clayton Actual House Prices and Two Regression 151
Forecasting Models
Figure 4.11 Comparison - Doncaster Actual House Prices and Two Regression 153
Forecasting Models
Figure 4.12 Annualised Movement of Chinas GDP, SSE and Melbourne 161
Metropolitan House Prices
Figure 4.13 Annualised Movement of Chinas GDP Growth, SSE and Clayton House 163
Prices
Figure 4.14 Annualised Movement of Chinas GDP Growth, SSE and Doncaster 165
House Prices
Chapter 5: Qualitative Research

Figure 5.1 Interview Plan 173
v
Figure 5.2 Education Nvivo Coverage Analysis 186

Figure 5.3 Residential Tourism - Nvivo Coverage Analysis 192
Figure 5.4 HNWIs and Residential Tourism 196
Figure 5.5 Middle Class and Residential Tourism 198
Figure 5.6 Gross Saving Rate as a Share Of GDP 204
Figure 5.7 Chinas 1 + 1 = 2 Wealth Accumulation Phenomenon 205
Figure 5.8 China Outward Foreign Direct Investment (USD Billion) 208
Figure 5.9 Chinas Outward FDI Top Destinations (USD million) 212
Figure 5.10 Capital Deflector Effect 214
Figure 5.11 The New Australian Residential Property Market Model 222
Chapter 6: Summary, Conclusions and Recommendations

Figure 6.1 Residential Tourist Characteristics and Decision Making Process 238
Figure 6.2 The New Australian Residential Property Market Model 241
Figure 6.3 Australian Existing Incoming Passenger Card 247
vi
LIST OF TABLES
Chapter 1: Introduction
Table 1.1 The Growth of the Global Middle Class 13
Table 1.2 Australias Housing Price Index 2013 and 2014 15
Chapter 2: Literature Review

Table 2.1 Trends of FREI in the World Real Estate Market 41
Table 2.2 HNWI Wealth Distribution by Region 58
Table 2.3 Worlds Top International Student Destinations 2008 70
Table 2.4 Literature Gap Summary 73
Chapter 3: Research Design and Methodology

Table 3.1 Research Objectives and Approaches 77
Table 3.2 Mixed Methods Typologies: Design Type, Variants and Notations 82
Table 3.3 Fundamentals of Various Mixed Methods 83
Table 3.4 Research Data Collection Strategies and Characteristics 87
Table 3.5 Mixed Methods Sampling Methods 88
Table 3.6 Data Sources Leading Economic Indicators Australia 91
Table 3.7 Data Sources Chinas Leading Economic Indicators 92
Table 3.8 Non-traditional Emerging Determinants 97
Chapter 4: Quantitative Analysis

Table 4.1 Most Popular Suburbs for Migrants in Melbourne 2011 114
Table 4.2 Melbourne Suburbs with Highest Percentage of Persons Born in Selected 114
Countries 2011
Table 4.3 Correlation of Leading Economic Indicators with Melbourne Metropolitan House 121
Prices
Table 4.4 Pearson Correlation Coefficients, r-values and the Lagged Periods for Melbourne 122
Table 4.5 R-value Rankings for the Melbourne Metropolitan Residential Property Market 123
Table 4.6 Correlation of Leading Economic Indicators with Clayton House Prices 124
Table 4.7 Pearson Correlation coefficients, r-values and the Lagged Periods for Clayton 125
House Prices
Table 4.8 R-value Rankings for the Clayton Housing Market 126
vii
Table 4.9 Correlation of Leading Economic Indicators with Doncaster House Prices 127
Table 4.10 Pearson Correlation Coefficients, r-values and the Lagged Periods for Doncaster 128
House Prices
Table 4.11 R-value Rankings for the Doncaster Housing Market 129
Table 4.12 Single Equation Regression Model for the Melbourne Metropolitan Residential 131
Property Market
Table 4.13 Significant Determinants in the Melbourne Metropolitan Residential Property 132
Market
Table 4.14 Melbourne Metropolitan - Forecast Results for Second Quarter 2014 133
Table 4.15 Single Equation Regression Model for the Clayton Residential Property Market 133
Table 4.16 Significant Determinants in Clayton 134
Table 4.17 Clayton - Forecast Results for Second Quarter 2014 135
Table 4.18 Single Equation Regression Model for the Doncaster Residential Property Market 136
Table 4.19 Significant Determinants in Doncaster 136
Table 4.20 Doncaster - Forecast Results for Second Quarter 2014 137
Table 4.21 Correlation of Foreign Student Enrolments with Melbourne, Clayton and 140
Doncaster House Prices
Table 4.22 International Student Enrolment Pearson Correlation coefficients, r-values and 141
the Lagged Periods Analysis
Table 4.23 Foreign Student Enrolments Ranking According to r-value in Melbourne 141
Table 4.24 Foreign Student Enrolments Ranking According to r-value in Clayton 142
Table 4.25 Foreign Student Enrolments Ranking According to r-value in Doncaster 142
Table 4.26 Correlations between House Prices and Overseas Visitor Arrivals 144
Table 4.27 Tourist Arrivals (long term) Ranking According to r-value in Melbourne 145
Table 4.28 Tourist Arrivals (long term) Ranking According to r-value in Clayton 146
Table 4.29 Tourist Arrivals (long term) Ranking According to r-value in Doncaster 146
Table 4.30 Single Equation Regression Model for Melbourne Metropolitan Residential 148
Property Market with Non-traditional factors
Table 4.31 Model Validation for the Melbourne Residential Property Market with 149
Residential Tourism
Table 4.32 Single Equation Regression Model for Clayton Residential Property Market with 150
Non-traditional factors
Table 4.33 Model Validation for the Clayton Residential Property Market with Residential 151
Tourism
Table 4.34 Single Equation Regression Model for Doncaster Residential Property Market 152
with Non-traditional factors
Table 4.35 Forecast Results for Second Quarter 2014 Doncaster 153
Table 4.36 Chinas Independent Variables and Data Points 157
Table 4.37 Correlation of Chinas Leading Economic Indicators with Melbourne 159
viii
Table 4.38 Pearson Correlation coefficients, r-values and the Lagged Periods For Melbourne 159
House Prices
Table 4.39 Correlation of Chinas Leading Indicators with Clayton House Prices 162
Table 4.40 Pearson Correlation coefficients, r -values and the Lagged Periods For Clayton 162
Residential Property Market
Table 4.41 Correlation of Chinas Leading Indicators with Doncaster House Prices 164
Table 4.42 Pearson Correlation coefficients, r-values and the Lagged Periods For Doncaster 164
House Prices
ix
ABBREVIATIONS AND ACRONYMS
ACGBs Australian Commonwealth Government Bonds
AUD Australian Dollar
BOP Balance of Payment
DM Developed Market
DV Dependant Variable
EM Emerging Markets
EMEA Europe Middle East Africa
ERP Estimated Resident Population
FDI Foreign Direct Investment
FIRB Foreign Investment Review Board
FREI Foreign Real Estate Investment
FPI Foreign Portfolio Investment
GFC 2008 Global Financial Crisis 2008
HNWI High Net Worth Individual
IMF International Monetary Fund
IV Independent Variable
LTVA Long Term Visitor Arrival
PPP Purchasing Power Parity
QE Quantitative Easing
RMBS Residential Mortgage Backed Securities
RT Residential Tourism
RTs Residential Tourists
STVA Short Term Visitor Arrival
STVAV Short Term Visitor Arrival Victoria State
x
SWF Sovereign Wealth Fund
VFR Visiting Friends and Relatives
USA United States of America
USD United States Dollar
xi
Abstract
Active participation by foreign investors in the Australian residential property market has been most
evident since the Global Financial Crisis 2008 (GFC 2008). According to National Australia Bank, 16%
of the total sales in Australian new housing markets were transacted into the hands of foreign
buyers in 2015 with Foreign buyers involvement reached 21% in NSW and Victoria (NAB, 2015).
Furthermore, Janda (2014) predicted that Chinese investors and newly arrived migrants would be
investing approximately AUD44 billion into Australian residential real estate market over the next
seven years. Empirical studies only shed limited information on new overseas private wealths
investment characteristics and strategies. These relatively distinct and unique investment
behaviours are set to impact on the Australian residential property market significantly based on an
entirely new perspective of global cross border private wealth investment strategies.
According to Savills (2014) estimates, direct-owned residential property contributes 83% of the total
value of property in the world of USD180 trillion. As a comparison, Australias residential property
market is valued at AUD5.93 trillion (based on 0.745 USD:AUD exchange rate as at 30 th June 2015)
with a housing mortgage market of AUS1.47 trillion (CoreLogic, 2015). Since the GFC 2008 house
prices in both Sydney and Melbourne have continued to escalate with Australia receiving strong
endorsement from the international investment community, being the seventh and ninth most
popular Foreign Direct Investment (FDI) destinations in the world in 2012 and 2013 respectively;
attracting USD57 billion in 2012 and USD50 billion in 2013 (UNCTAD 2013, UNCTAD 2014).
This research focuses on the emerging overseas investor determinants for the Australian residential
property market subsequent to the GFC 2008. The aim of this study is to determine whether there is
historical evidence and whether there are emerging trends to support the existence of a significant
relationship between overseas investors and residential housing markets performance. This
research will first examine the established residential property market performance in metropolitan
Melbourne and two Melbourne suburbs which have attracted substantial overseas investment
interest. The foreign investment elements in Melbournes housing market will be assessed through a
case study on Chinese investors. This reflects the significance of recent FDI funds emanating from
China. The result of this research aims to provide a better understanding of the relationships
between the performance of the Australian residential housing market and its market determinants
in terms of both existing and emerging factors. The study yields empirical evidence that can
potentially assist policy makers in making informed decisions to promote Foreign Real Estate
Investment (FREI).
xii
Research was undertaken using a mixed method (quantitative and qualitative) approach. A
sequential explanatory mixed methods research design was used to provide a better
understanding of the multifaceted Australian housing market. Quantitative research constituted the
first phase of secondary data analysis upon which the theory was built for the second phase
qualitative analysis. The qualitative analysis involved semi-structured interviews with real estate
professionals in Australia and China. The qualitative phase helped to support and validate the new
determinants discovered in the quantitative study. The entire research was guided by adopting the
three-market model depicted by (Archer and Ling, 1997), reinforced by Higgins (2010) as the
research platform to facilitate a structural approach on the research coverage in this study. As
Australia has become increasingly relevant in the era of globalisation, an attribute labelled
Overseas Government Policies was added to the model. It constituted the Push & Pull model
established in this study to encompass the push factor from overseas exerting a new investment
dimension and its weight onto the local property market.
This quantitative research fell into the classification of predictive design. House prices in the
selected suburbs were predicted using the models established in this study and they were compared
with the latest residential property price trends as part of the validation measure on the models
established. Three statistical analyses were applied, namely Pearson Correlation Coefficient Matrix,
Multiple Linear Stepwise Regression and Descriptive Analysis. The qualitative research was
conducted in both onshore and offshore locations to solicit validations and in-sights on the new
investment trends and determinants. A series of semi-structured interviews were conducted with
eight senior ranking real estate professionals in Melbourne and seven senior ranking real estate
professionals in China. Results of this phase assisted in justifying, or otherwise, the findings that
overseas conditions and new drivers played a part in the Australian residential property market
performance.
Past empirical evidence revealed that traditional investment portfolios which comprised a mixture
of equity and bonds were either too volatile or provided an unacceptably low return (Ley, 2001).
Global real estate had gained significant attention from the world investment community due to the
relatively low volatility and relatively high returns. Real estate had emerged as an investment option
among both the large institutions and private investors seeking diversification on a global stage. In
the midst of extensive internationalisation and deregulation, Australias residential property sector
was identified as one of the major contenders for global investors seeking improvement to their
investment portfolio due to its relatively stable economic and political conditions.
xiii
Regression analysis on secondary data was performed on Melbourne Metropolitan, Clayton and
Doncaster house prices. Based on the correlation matrix and the three regressions equations,
factors associated with offshore investments had primarily shaped the models and emerged as a
relevant metric at least as significant as other traditional economic indicators. For example, 10-year
Government Bond Yields, Foreign Currency and Net Overseas Migration were significantly correlated
and formed the crucial components of the regression equations and correlation matrix. These
components were found to have higher significance than other more traditional residential market
determinants such as rent growth, GDP per capita and net saving rates in Australia.
In this study, atypical investing characteristics by new global private investors in Australia were
discovered. These global private investors looked beyond the traditional purpose of portfolio
diversification in their decision making on Australian residential property investment. They placed
great emphasis on emotional value factors such as clean air, recreation parkland and the secured
Australian living environment. They sought residential properties for leisure, for their offspring and
some ultimately aiming for attaining Australian permanent residency. It is believed that as long as
Australia maintains its favourable liveability standards, foreign investors from all over the world, not
just China will continue to invest in the Australian residential property market owing to its strong
brand presence.
Residential Tourism (RT) was identified as an emerging determinant of the Australian residential
property market. Residential Tourists (RTs) carry both the characteristics of being tourists and
migrants. In this study, RTs have been categorised into High Net Worth Individuals (HNWIs) and
Middle Class individuals. Note that both categories live life here in a similar style to an Australian
resident and they spend money in Australia much like tourists. While enjoying leisure activities
much like tourists, the extensive duration of their stay in Australia resembles the profile of a migrant
to Australia.
Education was validated repeatedly empirically as a major component of the Australian service
industry and offer, potentially overtaking iron ore as one of the largest foreign exchange income
sources (Loussikian, 2015). Contrary to common perceptions that international students were
mostly confined to tertiary degree courses, exploration in this study revealed an emerging trend of
international student enrolments in Australias primary and secondary schools. As a result,
international students have been residing in Australia for a much longer period of time compared to
the 1980s or 1990s. This emerging trend further incentivised overseas-based parents to invest in the
residential property market in Australia for their childrens accommodation purposes. This study
revealed that decision making by these international students was mainly focused on the relative
xiv
reputation and cost of Australian tertiary institutions compared to alternative universities in the
United States and United Kingdom. They would decide to have their education in Australia in their
earlier years as a pathway to be eventually admitted to a reputable university.
This thesis is the first to take the research cross-border whereby interviews were conducted with
the senior real estate professionals in both Australia and China. This research identified the latest
investment decision making process undertaken by both the Chinese HNWIs and the expanding
Middle Class. Important insights on major investment determinants such as Chinas 1 + 1 = 2
phenomenon, Chinas going-out policy and Capital Deflator effect were uncovered and
discussed. These findings established empirical validations of offshore investments in Australias
residential property market with an increased understanding.
Through merging both the new overseas inward investment patterns and the domestic conventional
determinants of the Australian residential property market, a new trend in the Australian residential
property market was identified. The emergence of this group of global property investors who have
looked beyond the traditional valuation methods had lifted the Australian residential property
market to a new prospective. Empirical evidence established in this thesis can provide appropriate
assessment and analysis platform for the Australian residential property market which has become
increasingly complex due to the uprising influences of various offshore variables. These factors must
not be overlooked and should be added to the traditional valuation method so as to enhance the
relevance of research outcomes.
xv
Chapter One:
Introduction
1.1 Background
One after another Quantitative Easing (QE) policies introduced into many of the worlds leading
economies subsequent to the shock of the GFC 2008 exacerbated volatility in equity markets and
encouraged low yields in the bond markets. Over the past 10 years international investors have by
and large been disappointed with the investment returns from their traditional portfolios which
typically comprise largely of a mixture of equity and bonds (Azelby, 2012). Global investors have
intensified their efforts in seeking alternative investments as replacement for or hedge against their
existing portfolios (McDermott, 2013). According to Palin (2014), the traditional investment
portfolios of a mixture of equity and fixed interest securities are either too volatile or provide a low
return with a weighting towards bonds. As a result, global real estate markets have gained
significant attention from the worlds investment community due to their relatively stable risk
profile and returns. Furthermore, many governments in developed countries have new regulations
to attract offshore capital. This has increased the participation from both institutions and private
entities adding momentum to global investment activities by investing in global real estate markets
seeking better returns. Azelby (2012) predicted a structural shift toward higher real asset allocations
in the next decade. Real assets will move from an alternative to a mainstream asset class and
portfolio allocations could rise from 5%10% to as much as 25% (Azelby, 2012).
According to Savills (2014), two emerging trends will dominate and shape future world real estate
markets in the midst of increased cross border real estate investment activities:
i) Overtaking the rest of the world, funds emanating from Asia will emerge as the largest cross
border source of real estate investment
ii) Private Wealth has emerged as a serious contender in the global cross border real estate
market transitionally precluded mainly to the large institutions
Source: Savills, 2014
Asia is already one of the largest sources of cross border real estate investment funds. The
combined value of capital from mainland China and Hong Kong constitutes the second largest
source of cross-border investment in the world after the USA and is expected to surpass the USA in
the next few years. For the year to October 2013, USD23.7 billion in outward real estate investment
has flowed from China, most of this being invested in residential property (Savills, 2014).
1
In 2012 the reported AUD1.6 billion in commercial real estate transactions with Chinese capital
represented approximately 14% of total Foreign Direct Investment (FDI) into Australia (KPMG,
2014). According to KPMG (2014) this represents from a low base, an increase of approximately
8.1% compared to the previous year. The Chinese will invest approximately AUD44 billion into
Australias residential real estate market over the next seven years (Janda, 2014). The significance of
Chinese investors on global cross border real estate markets has led this research to focus on the
drivers of overseas investment on the Australian residential property market with a case study
based on Chinese investment activities on specific Melbourne residential property markets.
1.1.1 Global Wealth and Foreign Direct Investment (FDI)
Whilst the GFC 2008 had initially slowed FDI, growth of FDI remained at a healthy level, with an
estimated global FDI of USD1.35 trillion in 2012. Investment in finance and real estate was a key
foreign direct investment component (UNCTAD, 2009). Figure 1.1 shows the top 20 host economies
to attract FDI in 2012:
Figure 1.1: Top 20 Host Economies for Foreign Direct (Inward) Investment in 2012
Source: UNCTAD 2013
Figure 1.1 shows that Australia in 2012 was ranked seventh in the top host countries, attracting
USD57 billion of FDI into the country. United States is the top host economy attracting USD168
billion of FDI, followed by China with USD121 billion. The distribution of FDI is distorted as the small
2
nations of Hong Kong and British Virgins Island were ranked third and fifth respectively with
combined FDI of USD140 billion. This reflects the financial orientation of FDI with key global
locations providing investment hubs and offering competitive tax structures (UNCTAD, 2013). Figure
1.2 compares the 2013 global FDI ranking with the 2012 ranking:
Figure 1.2: Top 20 Host Economies for Foreign Direct (Inward) Investment in 2013
1 United States (1) 187

2 China (2) 123
3 British Virgin Islands (5) 92
4 Russian Federation (9) 79
5 Hong Kong, China (3) 76
6 Brazil (4) 64
7 Singapore (8) 64
8 Canada (10) 62
9 Australia (7) 50
Ranking 2013, 10 Spain (13) 39
(x) = 2012 Ranking 11 United Kingdom (6) 37
12 Ireland (12) 35
13 Luxembourg (14) 30
14 India (15) 28
15 Chile (11) 20
Advance Countries
16 Indonesia (17) 18
17 Colombia (18) 15
18 Kazakhstan (20) 14
19 Sweden (19) 8
20 France (16) 5
0 20 40 60 80 100 120 140 160 180 200
Billions of USD
Source: UNCTAD 2014
Whilst the United States and China remained the top two destinations for FDI and Singapore,
Canada and Spain had improved their rankings from 2012, the same couldnt be said for the rest of
the developed nations. Australia ranked ninth in 2013 compared to seventh position in 2012 and
ranked below other developed nations such as Canada and Singapore. Other developed nations
including United Kingdom, Sweden and France descended in their rankings. The distribution of FDI
continues to be distorted in the small nations of Hong Kong and British Virgin Islands. The Russian
Federation, Brazil and India emerged as developing nations that successfully attracted more inwards
FDI in 2013.
In the midst of world trade and economic globalisation and liberalisation, many governments
offered Quantitative Easing (QE) policies after the shock of the GFC 2008 were thought to have
exacerbated the volatility in equity markets and low yield in bonds investments. Traditional
investment portfolios typically hold a mixture of equity and bonds and for various reasons both
3
markets had disappointed international investors since GFC 2008. Global investors are seeking
alternative investments as a replacement or hedge against their existing portfolios in equity and
bond markets (McDermott, 2013).
FDI activities seeking alternative investment options had increased substantially during this time by
diversifying into various classes of recognised assets including real estate. Among the asset classes
attracting FDI, significant attention has been diverted to the real estate sector with increasing level
of liquidity, superior returns and offering improved opportunities for diversification with the
traditional investment portfolios holding only a mixture of equities and bonds (D'Arcy, 2009,
Topintzi et al., 2008).
UNCTAD (2011) reported that FDI in real estate markets had experienced significant growth in many
countries. This increasing trend was particularly evident in China. In 2010, FDI in real estate
accounted for more than 20% of total inflows into China. In 2012, the same inflows into the real
estate market went up to almost 50% of the total. A similar growth trend was observed in other
countries. FDI in the real estate market represents nearly 40% of total FDI inflows in Spain and
ranked second only to Indias computer software industry in 2007. (Economist, 2008, Rodrguez and
Bustillo, 2010). Evidently, cross border foreign real estate investment was on a rise in this global
liberalization era (D'Arcy, 2009, UNCTAD, 2009, UNCTAD, 2013, Topintzi et al., 2008).
UNCTAD (2013) reported a similar surge in alternative investments by Sovereign Wealth Funds
(SWFs). In addition to the traditional investment classes such as utility companies (electricity, gas
and water), SWFs had increased their exposure to stable alternative asset classes including real
estate. Combined, the cumulative SWFs cross border investments leapt by 44% between 2011 and
2012. In the current global investment environment this demonstrates the growing importance of
alternative asset classes as a key investment market.
Real estate assets can offer an investment category to investors with opportunities for
diversification. Concurrent with the growth of global portfolios investment in real estate,
opportunities to invest in real estate were made available to investors including listed real estate
securities. These are listed vehicles which can be traded and have real estate as the underlying
asset. In gaining momentum and coupled with the fact that cross border foreign real estate
investments activities were well supported by easily accessible information attributed to the
advancement in information technologies, there has been increased Foreign Real Estate Investment
(FREI) activities in many countries recently.
In recent years, private investment has led to a noticeable increase in FDI across many world
economies (Savills, 2014). Contrary to the general perception of the world real estate market
4
dominated by commercial properties, Savills (2014) estimated that directly owned residential
properties contribute approximately 83% of the total USD180 trillion world property universe. Only
approximately 17% related to commercial property. For the total USD20 trillion investable
commercial properties, half was owned by private individuals either directly or indirectly. Figure 1.3
shows the composition of total world real estate value in 2014 as estimated by Savills:
Figure 1.3: World Real Estate Value
Directly owned by UHNWIs

Privately owned
Investable real estate
Source: Savills 2014
Figure 1.3 illustrates that out of the total estimated world real estate value of USD180 trillion,
residential properties portion was approximately USD150 trillion, whilst commercial properties only
contribute approximately USD30 trillion. Amongst the USD150 trillion in residential properties, the
majority of these residential properties (approximately USD100 trillion) were made up of non-
investable assets and USD50 trillion were investable assets.
The reverse scenario was observed in commercial properties. Amongst the total USD30 trillion in
commercial real estate, investable properties contributed approximately USD20 trillion versus the
non-investable of USD10 trillion. In terms of investable real estate, residential properties valued at
USD50 trillion was approximately 2.5 times more than the commercial properties of USD20 trillion.
Within these estimated values, the real estate holdings of High Net Worth Individuals (HNWIs) total
over USD5 trillion, or around 3% of entire worlds real estate value. Figure 1.4 depicts the Australian
residential housing market value in 2014 as compared to the world real estate market:
5
Figure 1.4: Australian Residential Property Value
Australian Residential property market = AUD5.93 trillion in 2014

Housing mortgage market = AUD1.47 trillion.
(ABS 2015, CoreLogic, 2015)
ASX Market Cap = AUD1.5trillion
(ASX 2015)
Source: ABS 2015, ASX 2015, CoreLogic 2015
As per Figure 1.4, Australian residential properties market was valued at AUD5.93 trillion with the
housing mortgage market stood at AUD1.47 trillion. In 2014, the issuance of RMBS hit AUD32 billion,
its highest level since GFC 2008 (ABS, 2015, CoreLogic, 2015).
Recent market commentaries and reports provided crucial information with regard to the
globalization impacts on the world economies subsequent to the GFC 2008 (for example AOFM,
2015, Azelby, 2012, Canstar, 2014). Whilst the FDI continues its importance as the aid to the world
economys growth and reform, the emerging trend of diminishing preference to traditional
investment portfolios comprising solely of a mixture of equity and bonds appeared to dominate
sentiment due in part to QE policies employed in economies around the world. As international
investment communities were demanding alternative investment options, real estate assets
emerged as a strong contender providing an apparent option for portfolio diversification due to its
increasing level of liquidity and superior return. Among the entire available real estate portfolios,
the residential property markets significance was undeniable being the largest asset class as per
Savills (2014)s finding.
6
1.1.2. Sources of Funds and Residential Property Market
RBC Wealth Management Capgemini (2015a) specifically defines HNWIs as:
High Net Worth Individuals (HNWIs) are individuals having investable assets of USD1 million or
more, excluding primary residence, collectibles, consumables, and consumer durables.
As depicted in section 1.1, Capgemini (2015b) and Savills (2014) identified two emerging trends in
FREI that will have a significant impact on the world real estate market. The Private Wealth or the
HNWIs from the Asia Pacific region are set to overtake western countries HNWIs as the biggest
investor in global property market investments. The corporate and institutional ownership and
acquisition of real estate globally that once dominated property markets suffered a setback in GFC
2008. During GFC 2008, the cross border activities in the world real estate market dropped
significantly as credit markets contracted and the availability of debt funding for property deals
diminished. A new trend seems to have emerged after the GFC 2008. SWFs, wealth management
companies, private bankers and wealthy families have stepped into the property market arena that
corporate bankers have deserted. Figures 1.5 and 1.6 compare the trends and compositions
between corporate investment and private investment in in global real estate for the period of 2007
to 2012.
Figure 1.5: Corporate Investment in Global Real Estate
1000
800
USD Billions
600 EMEA
AsiaPac
400
Americas
200
0
2007 2008 2009 2010 2011 2012
7
Figure 1.6: Private Wealth Investment in Global Real Estate
Comparing Figure 1.5 and 1.6 reveals that both Corporate Investment and Private Wealth
Investment in global real estate had recovered from the low levels of 2009. A clear difference was
that Corporate Investment in global real estate in year 2012, was close to USD600 billion, being still
far below the 2007 level (above USD900 billion). In contrast, from a low base, Private Wealth
investment in global real estate had surpassed the highest level in 2007 level and is coming close to
USD300 billion in 2012.
A conclusion derived from both Figure 1.5 and Figure 1.6 is that Asias investment in global real
estate has increased substantially since 2008. More significantly, Asia Pacific investors have emerged
as the most active player in cross-border real estate transactions, replacing the USA to become the
major investor in the global real estate market in both the corporate and private segment.
JLL (2015) reported that among Asian investors, Mainland China led cross-border real estate
transactions. China overtook Japan to lead Asia Pacifics commercial real estate investment volumes
in the second quarter of 2015 as demand for office and retail space in world major cities rose. Cross
border transactions accounted for 52% of total real estate transactions by volume in Australia to
reach USD4.4 billion. Although the transaction volume was down 44% year on year basis, it
represented an increase of 74% compared with the first quarter 2015.
For the year to October 2013, USD23.7 billion had been allocated from investors in China and Hong
Kong to cross-border real estate investment. Chinese direct investment was up almost 165% in
2012. Figure 1.7 illustrates cross-border capital originating from China and Hong Kong for the period
between 2007 until October 2013.
8
Figure 1.7: Cross-Border Capital Originating From China and Hong Kong
25
20
USD Billions 15
10
5
0
2007 2008 2009 2010 2011 2012
2013
Hong Kong China
Figure 1.7 shows Hong Kong cross-border capital outflow dropped drastically during GFC 2008 to a
level below USD10 billion. It recovered and reached above USD15 billion in 2010 before dropping to
approximately USD12 billion in 2012. However, cross-border capital from Hong Kong did not recover
to its pre-crisis level. During the same period, cross-border capital flowing out from Mainland China
increased significantly over the period of 2008 to 2013. In 2008, only minimal cross-border capital
flow from Mainland China was noted. The figure increased substantially to more than USD7 billion
2013. The combined cross-border capital outflow from Mainland China and Hong Kong was USD23.7
billion from January to October 2013 (Savills, 2014).
Among all these cross-border transactions, private capital played a major role with observed
Chinese buyers seeking property for their offspring (often bases for student /children study), or to
achieve permanent residency. These Chinese private investors seem to be more willing to undertake
debt financing in their real estate investments. Some of them were comfortable with higher-risk
property development positions. As a result, cross-border real estate transactions were concluded in
hands of these private wealth funds that were precluded from them previously (Schlesinger, 2014,
Savills, 2014).
Whilst overall transaction numbers in the corporate sector were still below 2007 levels subsequent
to GFC 2008, private real estate deals were nearly a third higher in 2012. Private wealth, specifically
Chinese private wealth had increased significantly to a level that will create sizable impacts on
current and future cross border real estate transaction activity. According to Palin (2014), since 2011
Chinese private wealth have had a more mature attitude toward investing. They prefer to undertake
9
lower-risk investments while continuing to be active in diverse wealth management activities. This
private wealth, specifically HNWIs has historically been investing in alternative assets that include
real estates. The creation of wealth can be demonstrated with higher concentration of HNWIs in
Asia than in the Americas or Europe. Figure 1.7 revealed that Chinese cross-border investment into
global real estate markets had risen rapidly since the GFC 2008. It is perceived that this significant
growth of private wealth in Asia and the resultant fund flows investing into cross-border real estate
transactions will result in a revolutionary change the nature of world real estate investment (KPMG,
2014).
The credit crisis and limited debt funding during the GFC 2008 were believed to be the main reasons
that gave rise to two new trends in the world real estate markets:
i) Significant reduction in corporate cross-border activities in the world real estate market.
ii) A new trend that SWFs, wealth management companies, private bankers and family offices
have stepped into the property deals that corporate bankers have absconded. These private
wealth funds seem to be more willing to take the place of debt financing or to tolerate
higher-risk development positions.
Savills (2014) projected that sources of funds provided by private wealth will continue to grow and
play a significant role in world cross-border real estate deals. The unique investment behaviour of
these private wealth funds which favours residential property for their children or to achieve
permanent residency (Chinese in particular) will shape the worlds largest property segment, i.e. the
residential property market.
Furthermore, the International Monetary Fund (IMF) reported that China had overtaken the US as
the worlds biggest economy in 2014. The Chinese Gross Domestic Product (GDP) in 2014, based on
Purchasing Power Parity (PPP), was USD17.6 trillion compared to the US being USD17.4 trillion (Ma,
2014). Without adjusting for PPP, the IMF estimated Chinas raw GDP to be closer to USD10 trillion.
Since the GFC 2008, Asia has replaced the Americas and emerged as the biggest player in the world
real estate market. Asian investors are set to be the major source of funds among all cross-border
real estate transactions (JLL, 2015, Knight Frank, 2014, KPMG, 2014, Savills, 2014). This study intends
to investigate the drivers that brought about overseas investments in the Australian residential
property market subsequent to GFC 2008. Specifically this research will look at the Chinese private
wealth investment in the Australian residential property market.
10
In a similar manner, but perhaps on a different scale and magnitude, the emergence of the global
emerging middle class income earners is set to result in a shift in the world economys dynamic and
consumption pattern. Wilson (2008) projected that:
i) The world spending power is shifting towards the middle-income economies. Goldman
Sachs noted that the rise of the middle-class income earner shall give rise to a shift in the
global consumption pattern, moving away from the rich or developed countries to the
middle-income economies (As of 1 July 2015, The World Bank defined middle-income
economies as those with a Gross National Income (GNI) per capita, calculated using the
World Bank Atlas method, more than USD1,045 but less than USD12,736). The scale and
magnitude of this shift are significant enough to give rise to global spending to be
dominated by the middle-income economies alongside with the largest population countries
entering the middle-income group. The rise of the BRICs (Brazil, Russia, India and China) and
N11 economies (Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan,
the Philippines, Turkey and Vietnam) are at the centre of this situation. By 2050, this middle-
income bulge will include six of the N11 (Egypt, Philippines, Indonesia, Iran, Mexico,
Vietnam) and three of the BRICs (China, India, Brazil), and will be responsible for close to
60% of the worlds GDP.
ii) There will be a major shift in spending power towards middle income people in an
unprecedented magnitude. The pace of the world middle class expansion is likely to pick up
further and reach its peak by 2020. As a result, two billion people or around 30% of the
worlds population could join the global middle class by 2030.
Source: Goldman Sachs 2008
As a result of these two trends, the middle income group is set to dominate a much larger share of
the worlds income in the midst of rising consumption power of this expanding middle class. The
massive scale of global middle-class growth will potentially change the world and shape new
spending patterns, resource use, environmental and political pressures on a scale not seen since the
formation of the developed countries middle classes in the second half of the 19 th century. Figure
1.8 illustrates the GDP for the world economies comparing 2007 and the forecasted 2050:
11
Figure 1.8 World Economies GDP in 2007 and 2050
80000
70000
60000
50000
USD Billion
40000
30000
20000
10000
GDP 2007 US$bn GDP 2050 US$bn
Goldman Sachs projects the rise of China and India and the Emerging Economies will overtake the
rest of the worlds GDP by 2050. Out of the richest countries in 2007, seven developed counties will
fall out of the top 20 largest GDP economies alongside with the rise of BRICs and N11 in terms of
GDP. Reversing the dominance of economies such as the USA and some EU countries, China and
India will emerge as the two largest economies alongside other emerging economies such as Brazil,
Russia, Mexico and Indonesia.
As a result of these shifts, the purchasing power of middle income countries is set to overtake the
existing rich countries. Figure 1.9 illustrates the portion of world GDP attributable to the middle
income earner comparing 1960, 2007 and 2050:
12
Figure 1.9 Share of Global GDP by Middle Class
60%
50%
40%
30%
20%
10%
0%
1960 2007 2050
By 2050 the middle class could be responsible for 57% of global GDP in PPP terms, up from 31% in
2007. In USD terms, this represents an increase from 15% to 43%. The fact remains that the
spending power had already been shifted away from the richest countries towards a growing
emerging middle-income economies. In 1980, the seven largest economies in the world in USD
terms were all developed economies. China has since emerged as the second largest economy after
the USA and by 2025 some of the countries in BRICs would emerge as leading world economies. The
distribution of global incomes could narrow even further as other middle income countries continue
similar to China and India. The middle income group, which is dominated by a subset of the BRICs
and N11 will impact global spending patterns in a significant manner (Wilson, 2008). Table 1.1
illustrates the surge in the global middle class:
Table 1.1: The Growth of Global Middle Class
(Millions of People)
2009 2020 2030
North America 338 18% 333 10% 322 7%
Europe 664 36% 703 22% 680 14%
Central & South America 181 10% 251 8% 313 6%
Asia Pacific 525 28% 1740 54% 3228 66%
Sub-Saharian Africa 32 2% 57 2% 107 2%
Middle East & North Africa 105 6% 165 5% 234 5%
World 1845 100% 3249 100% 4884 100%
Source: The World Bank 2010
13
Ernst & Young (2013) projected that two thirds of the global middle class will be residents of the
Asia Pacific region, up from 28% in 2009. Although the middle class populations in North America
and Europe remain consistent, their respective shares of the world population are substantially
reduced in the forecast. A significant proportion of the new Asian middle class is also expected to be
at the upper end of the income bracket and possess significant spending power.
It is important to note that the emerging Asian middle class as the largest spenders in the world
market coincides with the findings from Capgemini (2014), Savills (2014) and Knight Frank (2014)
that Asia Pacific is the home to the fastest growing HNWI markets and is expected to surpass North
America in the near future. As the spending power begins to shift from the West to Asia Pacific,
understanding the behaviours and attitude of investors in Asia Pacific towards investments in
overseas real estate will provide a meaningful and insightful footing for future studies on offshore
real estate investment.
1.1.3 Foreign Investment in Australian Residential Real Estate
According to Janda (2014), Chinese investors and newly arrived Chinese migrants will invest
approximately AUD44 billion into the Australian residential real estate market from 2014 to 2021.
Allen (2015) reported that most of the foreign investment in Australian residential property was
concentrated in Australias two largest cities, Sydney and Melbourne. An estimated 18% of new
dwellings in Sydney and 14% in Melbourne were purchased by foreigners. A NAB (2014) survey of
residential real estate agents detailed the profiles of purchasers. The research showed that foreign
investors continued to keep the pressure up on capital city house prices.
In the first half of 2014, house prices in both Sydney and Melbourne were at record high levels.
Prices were reported by media to have moved beyond the reach of the majority local buyers
especially in the desirable locations (for example AFR, 2014, Birrell, 2013, Economics, 2014).
According to these reports, many considered this a trend due mainly to the offshore investors,
especially Chinese investors. Leading Australian banks warned that the increased interest from
foreigner will further heighten Australias already inflated property prices. Table 1.2 shows the
Australian Bureau of Statistics (ABS) Australian housing index for the last quarter of 2013 and 2014.
14
Table 1.2: Australia Housing Price Index Q4 2012 and Q4 2014
Dec Qtr 12 to Dec Dec Qtr 13 to Dec

Qtr 13 Qtr 14
RESIDENTIAL PROPERTY PRICES % change % change

Weighted average of eight capital cities 9.3 6.8
Sydney 13.8 12.2
Melbourne 7.9 4.5
Brisbane 5.7 5.3
Adelaide 3.4 2.5
Perth 8.7 1.2
Hobart 4.9 2.2
Darwin 5 0.8
Canberra -0.3 1.7
Source: ABS 2015
Table 1.2 shows that between the 4th Quarter of 2012 and the 4th Quarter of 2013, residential
property prices as measured by the Australian Bureau of Statistics rose unevenly across Australia.
Growth was primarily in Sydney (+13.8%), Perth (+8.7%) and Melbourne (+7.9%). A similar trend was
observed between the 4th Quarter of 2013 and 4th Quarter of 2014, when Sydney residential
property prices had the highest increase (12.2%), followed by Brisbane (5.3%) and Melbourne
(4.5%). Figure 1.10 shows the number of approved offshore purchases on both developed
residential properties and properties for development in Australia:
Figure 1.10: Residential Real Estate Approvals for Foreign Investors
5
('000)
0
2006 2007 2008 2009 2010 2011 2012
For Development Developed Residentials
Source: FIRB 2013
15
Figure 1.10 highlights the significant lift in foreign investor interest in the Australian residential
property market. The 11,700 approvals in 2012 being more than double those in 2009. For
Development refers to approval obtained by foreign persons (both temporary residents and non-
residents) from FIRB to purchase an established dwelling for redevelopment (that is demolishing the
dwelling and constructing new residential dwellings in its place). These applications are normally
approved on condition that at least two dwellings are built for the one demolished. Developed
Residential refers to FIRB approval for foreign persons who are temporary residents need a place to
live during their time in Australia, temporary residents can apply to purchase one established
dwelling to use as a residence while they live in Australia. The purchase of an established dwelling in
these circumstances would normally be conditional on the foreign person selling the property when
they leave Australia (FIRB, 2013).
Concern at the increasing offshore investment had led to a formal request in Parliament by the then
Australian Federal Treasurer, the Hon Joe Hockey MP, to the Australian Foreign Investment Review
Board (FIRB) in 2014. The FIRB was to inquire into and report on the particular application of
Australias foreign investment policy relative to the Australian residential real estate market. In
March 2015, Mr. Hockey announced the first forced divestment since 2007 when he ordered the
sale of a AUD39 million Point Piper mansion that had been illegally purchased by Chinas 15 th richest
man. FIRB chairman Brian Wilson explained that although it was the governments intention to
control illegal buying of Australian residential properties, the ability to uncover and prosecute illegal
buying by foreigners was limited. There were approximately 11 million residential dwellings in
Australia and about 600,000 property transfers every year. Some of those properties were
exchanged contrary to the law, but the ability of the Regulator to discover these cases was
significantly limited without an automated central data repository of to aid detection. It was mooted
that the Australian Taxation Office could be given the responsibility of managing the registration of
foreign residential property purchases (Rose, 2015).
The Government attention to foreign buying came as a result of numerous news articles and a
public outcry regarding the recent substantial surge in house prices in major cities such as Sydney
and Melbourne (Economics, 2014). The Government was concerned about the recent spike in house
prices in major Australian cities. The Federal Government inquiry to FIRB in 2014 was a clear
indication of the need to research cross-border investments and money flowing into the Australian
Commonwealth Bank (2014) explained that foreign investors demand was only a marginal
contributing factor to the hike in Sydney and Melbourne house prices. Analysis of the FIRB data on
16
residential real estate approvals for both new dwellings and established residential indicates that
the average transacted value was at AUD1.5 million. This value implies that most residential
property transactions were at the top-end prices and was unlikely to have influenced the
affordability of residential properties in the typical range where the largest volume of property sits.
Figure 1.11 shows the trend of the average value of residential properties purchased by foreign
investors.
Figure 1.11 Average Value of Residential Estate Approved
6
Average Value (million)
0
2006 2007 2008 2009 2010 2011 2012
New Dwellings Developed Residential Vacant Land
Source: FIRB 2013
Figure 1.11 demonstrates the average value of three different types of residential properties,
namely new dwellings, developed residential and vacant land, purchased by offshore investors from
2006 to 2012. Whilst the average value for both vacant land and developed residential properties
rose since 2011, new dwellings descended since 2011. The average transacted values in 2012 for all
the 3 categories of properties fell within the range of approximately AUD0.5 million to AUD2.5
million (FRIB, 2013).
Consistent with FRIB findings, Schlesinger (2015) reported that a new survey of 105 Chinese real
estate agents conducted by off-the-plan marketing website Investorist, found that Chinese
investors were not multimillionaires. The Chinese investors were a group of savvy buyers seeking
17
high yielding properties closer to USD500,000 than USD1million. The survey found that 54% of
Chinese investors were looking to spend less than USD500,000 on an overseas investment property
and 35% looking to spend between USD500,000 and USD700,000. The determinants cited for
Chinese investors buying into the Australian residential property market were: better investment
fundamentals; the opportunity to acquire freehold property; higher yields compared to China
property market; more stable economic environment; and the ability to borrow in Australia. The
two other main reported reasons to acquire Australian residential properties were education for
their children studying in Australia and as part of their future plan to migrate to Australia due to
better living conditions.
In addition, Commonwealth Bank (2014) tabulated various factors that drive the housing market
demand in Australia, these being:
i) Recent migrants typically have disposable wealth when they arrive and participate in the
housing market sooner than many unskilled migrants.
ii) Competition with mining and infrastructure for skilled labour and materials limited the
supply of new dwellings.
iii) Higher rate of education visas granted.
iv) Real estate is proving attractive for self-managed super funds.
Source: Commonwealth Bank 2014
The population growth rate in Australia has been rising. Figure 1.12 demonstrates the percentage
growth in Australias population for the period 1982 to 2014:
18
Figure 1.12: Australia Population Growth (Annual % Change)
2.50
2.00
Long Run Average
Percentage Change
1.50
1.00
0.50
0.00
Apr-1988
Apr-1995
Apr-2002
Oct-2005
Apr-2009
Oct-1984
Oct-1991
Oct-1998
Oct-2012
Feb-1987
Feb-1994
Feb-2001
Feb-2008
Dec-1985
Dec-1992
Dec-1999
Dec-2006
Dec-2013
Aug-1983
Aug-1990
Aug-1997
Aug-2004
Aug-2011
Jun-1982
Jun-1989
Jun-1996
Jun-2003
Jun-2010
Source: ABS 2015
Figure 1.12 shows Australian population growth in annual increments with the current rate of
increase of 1.79% per annum. This is well above the 32 year average of 1.4% per annum. According
to the Commonwealth Bank (2014), since 2006 the population growth in Australia has been mainly
attributable to the increased level of skilled migrant intake. Figure 1.13 shows the comparison
between the two major attributes, namely natural increase and net migration, towards the
population growth for the period of 1981 to 2014.
19
Figure 1.13: Population Drivers in Australia
150
130
110
Number ('000)
90
70
50
30
10
Sep-1982
Sep-1987
Sep-1992
Sep-1997
Sep-2002
Sep-2007
Sep-2012
Dec-1983
Mar-1985
Dec-1988
Mar-1990
Dec-1993
Mar-1995
Dec-1998
Mar-2000
Dec-2003
Mar-2005
Dec-2008
Mar-2010
Dec-2013
Jun-1981
Jun-1986
Jun-1991
Jun-1996
Jun-2001
Jun-2006
Jun-2011
Natual Increase New immigration
Source: ABS 2015
Figure 1.13 demonstrates that from 2006, net migration had taken over natural increase as the main
contributor to Australian population growth. The population growth attributable to natural increase
is hovering around 30,000 people per quarter whilst since 2006 net migration has continuously
surpassed the 30,000 figure.
Australian migration activities are constantly evolving and increasingly complex in nature. As a
result, factors contributing to the Australian migration activities were multifaceted. One complexity
had been the addition of new sources of migration including troubled areas from countries such as
the Horn of Africa, Afghanistan and Iraq. Another complexity had been the rapid expansion of
Australias international student population. This trend was in its infancy during the early 1990s, but
by 2010, Australia had emerged as a leading exporter of education services. As at June 2014,
Australia was host to over 500,000 international students, with a significant proportion of these
students contemplating migration at the conclusion of their studies (AEI, 2015, DEAT, 2015). Some
of them had come to Australia as students with the primary intention of attaining permanent
residency. Students enrolled in programs ranging from a few weeks to several years contributed to
20
both short and longer term arrival statistics. It is envisaged that this emerging trend will develop into
a vital element of Australias relationship with emerging countries within the Asia-Pacific region and
in particular with the populous nations of China and India, in the context of both education and
tourism (Dwyer et al., 2010).
Education, as a major component of the Australian service industry, had overtaken iron ore as
Australias biggest foreign exchange income source for the 12 months period between March 2014
and March 2015 (Loussikian, 2015). Its role in the Australian economic environment has become
even more important in the midst of Government efforts to dilute the heavy reliance on resources
development (Creswell and Clark, 2007, Loussikian, 2015). Figure 1.14 illustrates foreign student
arrivals in different states in Australia:
Figure 1.14: International Student Enrolments in Australia
270,000
220,000
170,000 VIC
NSW
QLD
120,000
WA
70,000
20,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: AEI 2015
Figure 1.14 shows that New South Wales (NSW) and Victoria attracted the largest number of
international students. Pascoe (2015) expected the rise in foreign students will give rise to demand
in Australian residential property especially in education hotspots like Sydney and Melbourne,
mainly due to the recent changes of Government regulations on migration policies which made it
easier for students to remain in Australia after graduating and eventually becoming permanent
residents.
21
In summary, there were clearly some unknown and unusual factors contributing to the surge in
housing demand in Australia in relation to foreign investors (Commonwealth Bank, 2014). The
normal investment theory and law of demand and supply was perceived inadequate to confirm the
reasons for offshore investors preference in Australia residential properties over other parts of the
world. Having established education could be one the factors driving foreign investment in the
Australian residential property market, more extensive research into other emerging factors causing
the surge of housing demand in Australia cities has become more desirable.
Furthermore, in an effort to fill the knowledge gap of these emerging factors contributing to the
latest surge in housing demands in Australian cities, this thesis explores an existing European
tourism migration trend that closely resembles a social development in Australia. According to
O'Reilly (2007), it had always been difficult to disentangle migration and tourism in Europe. Closer
observations seem to reveal that this social development in Europe possesses direct resemblance to
Australias current tourism migration patterns. The interaction between tourism and migration was
defined as Residential Tourism(RT).
Residential tourists definition specifically distinguishes them as an affluent group that enables them
to turn tourism as a way of life and to construct fluid and leisure lifestyles between places. RTs are
also being characterised as tourist who had ostensibly tried to settle, although they still remain in
some ways outside or above the community they have moved to. O'Reilly (2007)s observation
appear to resemble closely the Savills (2014) report which states that among cross-border
transactions, Chinese private capital seeking property for their offspring (often bases for student
/children study), or to achieve permanent residency played a major roles.
As mentioned earlier, private wealth in general and HNWIs in particular are anticipated to be
significant drivers of world cross border real estate transaction activity. Changes to living standards
among all these HNWIs may influence both tourism and immigration in both the source country and
the destination. Fluctuating relativities in living standards had been confirmed by earlier research as
a driver of migration. For example, migration from continental Europe to Australia was greatly
diminished once European living standard rose to comparable or higher levels than those prevailing
in Australia (Dwyer, 2010). The rising living standards and the emergence of an affluent middle class
in the newly industrialising countries of North East Asia has increased the numbers able to afford to
visit Australia as tourists or take advantage of the skilled migration category for the purposes of
immigration. In 2012, the Australian Business Innovation and Investment (Provisional) visa (subclass
188) was introduced. This immigration program allows overseas significant investors to apply for
an Australia permanent visa if they have invested at least AUD5 million into complying investments
22
in Australia and want to maintain business and/or investment activity in Australia after the original
investment has matured.
Garnaut (2015) reported that Australia is set to issue more than five million visas in 2015, something
not seen since World War II. He attributed the significant jump in the visas issuance to surging
numbers of international students, tourist and workers on short-term visas. According to Michael
Pezzullo, Secretary of the Department of Immigration, as many as 1.9 million foreigners are likely to
be in the country at any one time in 2015. In terms of the new migrants to Australia, the number of
Chinese born Australians has escalated more than triple to almost 450,000 in the space of two
decades. Those born in India has risen more than fourfold to almost 400,000. The findings coincide
with the projection that countries from Asia Pacific, particularly China and India, will contribute
significantly to the world middle class and numbers of HNWI.
Building on the literature, the focus of this study is to determine whether there is evidence of an
emerging relationship between overseas investors and the residential housing markets performance
subsequent to GFC 2008. Due to the recent significant funds flowing from China, the research will be
utilising Chinese investors as a case study to uncover emerging overseas investment patterns in
Australia. A detailed analysis of the recent Australian immigration policies will be essential to
examine the impacts of these policies on Chinese investors and the resultant determinants of
Australia residential housing performance. The study is expected to yield empirical evidence that
will assist policy makers in making informed decisions to promote FDI in the real estate market yet
maintain (or at least not worsen) the affordability of housing in Australia. The result of this study is
believed to yield findings that can assist the property market operators and investors in the
evaluation of the Australian residential housing market for informed investment decision makings.
1.2 The Statement of the Problem
Past literature suggested that diversification by location would more likely produce benefits in the
residential markets that were not perfectly correlated, although there was a degree of variability
depending upon the countries being examined (Wilson and Zurbruegg, 2003). In more recent
research, real estate assets were added to a mixture of asset portfolios comprising shares and
bonds. Improvements in the risk adjusted returns had resulted in real estate being incorporated as
part of the asset classes in the investment portfolio (Hoesli et al., 2004).
In reviewing relevant literature, the factors determining foreign investor choices were complex and
should be explained by a combination of recognised theoretical models (Moshirian and Pham, 1999,
23
Sirmans and Worzala, 2003). This was in line with Rodrguez and Bustillo (2010) who concluded that
portfolio theory is appropriate and can be applied in the study of FREI determinants with relevant
factors included.
Although there had been numerous economic papers (see Bourassa and Hendershott, 1995, Ross,
2011) on the impact of offshore investors on the local real estate market, reviews to date show that
there had not been tangible studies conducted on the factors that result in this emerging trend.
Recent offshore investors substantial investments focused on both Melbourne and Sydney
residential housing markets certainly signal an imminent need to investigate the causes of these
cross-border investments influxes. Limited and dated information was identified by Commonwealth
Bank (2014) as a real concern. Currently, information seems limited with regards to the relationship
between the overseas purchasers and the dynamics of the Australian housing market.
Reviews of market commentaries and empirical studies had shed limited information on some
distinctly unique characteristics relating to investment choices and decision making strategies of
private wealth investors. In fact, these emerging investment patterns from private wealth are set to
create an entirely new perspective in world real estate investments. Rare and new investment
strategies based on lifestyle and wealth preservation seems to play a much bigger role in these
HNWIs real estate decision making processes than anticipated. There had been limited studies
performed that assess the real estate investment decision models from the perspective of private
wealth. This knowledge gap constitutes the main focus of this thesis. Figure 1.15 illustrates a
conceptual model based on the studies for this thesis.
24
Figure 1.15: Conceptual Mapping of Private Wealth Real Estate Investments
PART B
PART A
PART C
Source: Author
GFC 2008 had shifted the focus of investment communities into uncertainties that equity and bond
markets were either too volatile or observed diminishing returns. Similar volatilities were observed
in global cross-border real estate investments. Figure 1.15 sets out the conceptual framework of the
research and aims to map the world cross-border investment activities with fundamentals evolving
within the real estate investments pursuits:
Part A of the research intends to examine the emergence of private wealth and HNWIs
stepping into the world cross-border real estate transactions that were the domain of
corporate institutions before GFC 2008.
Part B of the study will look into the significance of the private wealth and HNWIs from Asia
Pacific in the world cross border real estate transactions.
Part C examines the relationship between the factors that drive overseas investors into the
host economy and the residential market, in the Australian context. It forms the focus of this
study based on the recent increase in demand for and activity in the residential housing
market.
25
It is important to determine the strategic link and impacts derived from offshore investors to the
Australian residential property market. The understanding of various drivers causing offshore
investment in Australian residential property can result in the propositions that are expected to be
beneficial for the Australian economy in a macro perspective, and the Australian residential housing
market in a micro perspective. This is particularly evident, if Australia intends to continue to enjoy
the capital flow from foreign direct investments into the country. Knowledge on residential property
market dynamics for Australian policy makers needs to improve and evolve amidst the increasingly
significant role the overseas investors have in the structure of specific residential property markets
in major Australian cities. The findings of this study are believed to provide empirical validations of
factors that are useful and relevant for decisions by both Australian policy makers and industry
participants.
1.3 Aims and Objectives
The aim of this study is to examine various factors driving the growth of overseas private
investments into the Australian residential property market subsequent to GFC 2008, particularly in
major Australian cities like Melbourne. This study explores the performance characteristics of the
residential market in Melbourne suburbs and their relationship with the economic and financial
factors associated with Australian immigration policies, using Chinese private wealth and purchasers
as the case study.
This research seeks to answer the following research questions:
i) What are the determinants, both historical and emerging, that are impacting on the
Australian residential property market?
ii) What types of foreign investors are interested in Australian residential property and what
are the key features of their investment strategies? Are they buying residential properties
for owner occupation or are they foreign investors who buy to invest?
iii) What are the reasons and fundamentals of overseas investment into the Australian
residential property market and what government policies have influence over these
investment decisions?
iv) In the midst of global liberalization, is the Australian residential property market subjected
to increasing foreign influences and how significant are these external influences?
26
v) What are the key government economic, financial and immigration policies, both onshore
and offshore, that may potentially drive private wealth to invest in Australian residential
properties?
In summary, the aim of this study is to determine what are the emerging drivers and to what extent
these factors have shaped and continue to shape the foreign private investment in the Australian
residential housing market subsequent to GFC 2008. To enable a broader perspective and fuller
coverage, it is proposed that this thesis covers a span over a 11 years period from 2002 to 2013. A
major real estate cycle occurred within the period of assessment, namely the Global Financial Crisis
(GFC) in 2008.
The objectives of this study are:
i) To identify the major determinants, both historical and emerging, in the Australian
residential property market for the past decade (2002 to 2013). How have offshore
property investment patterns shaped the overall residential property market in Australia in
the past and the present, making specific reference to Melbourne?
Addressing research question I and II
ii) To explore the fundamentals of foreign cross-border real estate investment and the
related influential government policies onshore and offshore. Who are these foreign
investors? Are they mainly migrants into Australia who are buying properties for own
residential occupancy purposes or are they foreign investors acquiring properties as part of
their investment portfolio? What drove them to acquire properties overseas?
Addressing research question III
iii) To reveal the dynamics of Overseas Real Estate Investments in Australia and the
significance of these offshore investments shaping the local housing market. Assessing the
past and present, what are the different characteristics between these offshore investors as
against migrants when it comes to buying residential properties in Australia? Do they buy
based on a single location or do they hold a portfolio of properties / instruments on a
regional basis?
Addressing research question IV
27
iv) To reveal the key government policies, both onshore and offshore, that had driven foreign
investors into Australian residential property market. Literature revealed that Government
policies of foreign nations were correspondingly instrumental in the decision making
process of foreign investors. The study of foreign investments in the host country is more
comprehensive for the research on key Government policies of the foreign nation that drove
its citizens to expatriate money overseas is incorporated.
Addressing research question V
1.4 Research Design
This is an explanatory study utilising both quantitative and qualitative research

methodologies which constitutes a mixed methods research conduct (Amaratunga et al.,
2002). The execution of the research conduct will be distinctly separated into two phases
with quantitative followed by qualitative, thus classified as a sequential explanatory mixed
method design (Creswell and Clark, 2007). The research design aims to utilise qualitative
data to validate and explain the quantitative results and further provide in-depth
perspective of the research. As per research objectives defined in section 1.3 of this
chapter, this research shall be undertaken in five key stages. Figure 1.16 illustrates the
research framework:
Figure 1.16: Research Framework
Stage 1 Literature Review
Stage 2 Model Design facilitate research conducts
Stage 4
Stage 3
Qualitative
Quantitative 1. Non-random
(Deductive & 2. Non-probability
Predictive): Sequential
1. Descriptive - Semi-Structured Interviews
- Provide general - SENIOR Australian and Chinese
2. Correlation Analysis understanding
(SPSS) - Forms the pillar of Property Professionals
3. Multiple Regressions semi-structure
Analysis (SPSS) interviews Structured Questionnaires
questionnaires
Open-ended Discussions
Analysis- Nvivo
Discussions and Implementation
28
This research will be conducted in five stages:
i. Literature Review examine and review literature on foreign investment fundamentals,

historical Australian immigration and residential property market determinants. The
literature review will provide an overview of foreign investment strategies and historical
factors attributable to the growth in the Australian residential property market.
Furthermore, a literature review on global residential property market determinants will
provide indicators and pointers into various emerging determinants in Australia. The
theoretical background and empirical data from the literature review shall form the
platform for the research modelling and quantitative analysis.
ii. Model Design while quantitative analysis can determine the relationship of individual
economic variables to house prices, it tends to omit that most factors interact
simultaneously with varying intensity and at different time periods to house prices (Higgins,
2000). The review of literature underlined the importance of combining these influences
into a model to address the fundamental interactions and relationships between all the
determinants. The Archer and Ling (1997) model was used to build an economic model,
showing the best inter-relationship of separate economic variables to house prices. This
study focuses on foreign investment strategy and determinants in the Australian residential
property market. It is envisaged that a new research model incorporating foreign
government policies influence will be developed to ensure research effectiveness.
iii. Quantitative Research the respective traditional leading economic indicators and non-
traditional new determinants will be identified in this stage of the research. Utilising
correlations and regression methodologies, significant correlated historical determinants
and emerging new factors will be identified to form the basis and pillar for the subsequent
qualitative research. Furthermore, this stage of research constitutes the predictive design
phase (Teddlie and Tashakkori, 2009) which will provide three predictive models to forecast
the future trend of house prices in Melbourne and two selected Victorian suburbs.
iv. Qualitative Research based on the sequential methodologies, this stage of research shall
refine and explain those statistical results by exploring participants views in more depth
(Creswell 2003, Rossman and Wilson, 1985, Tashakkori, 1998). Non-random and non-
probability designed semi-structured interviews will be conducted with senior managers
from both local and Chinese real estate professional firms to help explain and validate (or
29
otherwise) the statistical results from the quantitative phase. This research privileged the
qualitative over the quantitative phase, not in the manner of the research conduct but in
terms of the research results interpretation. The second qualitative phase builds on the first
quantitative phase and the two phases are connected in the intermediate stage in the study
(Ivankova et al., 2006).
v. Discussion and Summary to discuss various newly identified determinants with reference
to the research objectives set in section 1.3. Besides tabulating the findings of this research,
this last section of the thesis will provide industry insights on various emerging cross border
real estate investment trends and determinants.
1.5 Significance and Scope

1.5.1 Significance
The corporate and institutional ownership and acquisition of real estate globally that once
dominated property markets suffered a setback in GFC 2008 (Savills, 2014). A new trend seems to
have emerged after the GFC 2008. SWFs, wealth management companies, private bankers and
wealthy families stepped into the property arena that was dominated by institutions historically.
This latest development is set to impact the world real estate markets.
Figure 1.17 demonstrates the importance of private wealth in world real estate markets for the
period of 2007 to 2013.
Figure 1.17: Private Wealth in World Real Estate Markets (by number of transactions)
60%
50%
40%
Composition %
30%
20%
10%
0%
2007 2008 2009 2010 2011 2012 2013
Private Wealth (Cross Border Real Estate investment)
Private Wealth (Total Cross Border Investment)
30
Since 2007, a clear trend emerged relating to the number of cross-border transactions for private
wealth investment and real estate investments. Figure 1.17 shows that private wealth transactions
contributed more than 50% of the worlds real estate investments since 2011.
When it comes to investment choices, cross-border investors were paying close attention to global
real estate markets. According to D'Arcy (2009), UNCTAD (2009) and Topintzi (2008) the real estate
sector was attracting signification interest with improved internationalisation and deregulation. This
international economic integration and liberalisation activities were steering global investors to seek
improvement in their investment portfolios through overseas diversification. With readily accessible
information attributed by advancement in communication technologies, further advances are
expected in the momentum of these liberalisation activities. The world economies are getting
closer or becoming more transparent due to global liberalisation. This emerging trend is set to
impact on the global cross-border investors decision making processes.
In recent research, real estate assets were added to a mixed asset portfolio along with shares and
bonds as part of the investment asset class (Hoesli et al., 2004). These studies revealed that the
global investors community was giving substantial attention to the real estate market, as an
emerging asset class in the midst of share market volatility and dismal bonds market returns. This
was substantiated by rapid growth in FREI along with the growth of portfolio investments in global
listed real estate securities.
Asian investment in the global real estate had been increasing since 2008. More significantly,
investors from Asia had emerged as the largest player in global cross-border real estate transactions,
replacing the United States of America to become the biggest investors in the global real estate
market in both Corporate and Private segments (Savills, 2014, KnightFrank, 2014). Wealth
management companies, private bankers and wealth families from Asia had stepped into property
deals that historically dominated by institutions. These private funds had emerged as one of the
most important diving forces in various cross-border real estate transactions once dominated by the
corporate world prior to GFC 2008.
As Fereidouni and Tajul Ariffin (2013) explained, government economies and financial policies cover
interest rates, physical infrastructure, FDI in other sectors, labour costs, exchange rate risks,
property prices, tourism agglomeration were all relevant in the assessment of cross border
investment in the real estates of host economies. These policies were perceived to have influence
over the FREI choices and decisions. It is a challenging task for Government to balance its effort to
31
attract FREI into the country and at the same time to maintain the affordability of residential
properties among its local residents, particularly in capital cities.
The recent AFR (2014) report detailed the emergence of the global property investors who look
beyond the traditional valuation methods such as the ratio of house price to local income. The
report explained that traditional valuation methods might not be applicable for the real estate
valuation exercises based on current market conditions. Empirical studies demonstrated the uprising
of some new and relevant variables that were considered influential and should be added to the
traditional valuation methodology to enhance the relevance of research outcomes (Moshirian and
Pham, 2000).
AFP (2014), Commonwealth Bank (2014) and Janda (2014) have reported recent increases in Sydney
and Melbourne house prices. Reports seem to have pointed towards house prices in both of these
major cities moving as a result of the Chinese investors buying activities. As Janda (2014) reported,
Wealthy Chinese will pour AUD44 billion into Australian real estate over the next seven years,
potentially pushing prices in one of the world's most expensive housing markets even higher. The
investment bank Credit Suisse used data from the Foreign Investment Review Board and other
government agencies to estimate the amount of Chinese investment in Australian residential
property at more than AUD5 billion a year (Economics, 2014).
Although relevant market reports and commentaries up to June 2015 were included in this study in
effort to keep appraised with the ever changing market conditions, two major economic events in
the second half of 2015 had the financial world shaken again with far reaching implications. Both
were perceived to be relevant to this study. In August 2015, China unexpectedly devalued its
currency which left the Yuan about 3% weaker against the USD. Chinas decision represented the
largest Yuan depreciation for 20 years and according to market commentaries, the potential
implications were more than substantial (Stewart, 2015). The Shanghai Composite share market
Index closed near 3000, having decreased more than 40 % compared to 5122 in June 2015. The loss
of market value in Chinese stocks was close to USD1.6 trillion, representing the combined value of
Australian Stock market (Sheehan, 2015). There was speculation in the current market that a re-run
of the 1997 Asian Economic Crisis was in the making. Sheehan (2015) attributed this free fall to the
excesses in Chinese real estate development. As China is Australias largest trading partner, Australia
is vulnerable to Chinese market volatility. As Australias residential property market had been partly
driven by Chinese capital, the markets concern on the future performance of the Australian housing
market was not without reason.
32
Bottonwood (2015) reported the world commodities market had fallen into bear market with the
commodities prices falling more than 40% from its peak. Inevitably, the debate focuses around
China given that its demand for raw materials was perceived to drive the great bull market of the
last decade. China is currently moving into an ex-growth phase with less need for infrastructure, and
thus for iron ore, steel, copper etc. The Chinese had also been moving to a model in which they
create more manufactured goods from scratch, rather than assembling parts made elsewhere. This
helped to explain why other Asian exports have been so weak. For commodity producing nations,
falling prices mean loss export earnings, lost jobs and currency crises. Australia, having long been
classified as a commodity nation, is experiencing the negative impacts due to falling commodity
prices.
Reference is made to various reports, market commentaries and economists assertion that the
favourable Australian property market performance due to FREI will help Australia to cushion the
negative impacts. It is undoubtedly a challenging task for the Australian government to strike a
balance between the need for foreign inward investment and social wellbeing. The Governments
economic and financial policies have to strategically cater for both the governments desire to
attract FDI, especially the FREI, into the country and still maintain the affordability of residential
properties among the local population, particularly in cities of Sydney and Melbourne.
It is expected that a better understanding of the relationship between the economy, financial
policies and the residential housing market will help to identify and address issues attributable as
factors gave rise to the overheating of the residential property market and at the same time, strive
to maintain a steady flow of FREI into the country. The expected benefits among which will include a
basis for decision making and a platform for further research that could include further
segmentation studies of the residential property market.
1.5.2 Scope and Limitation
The review of literature revealed the few studies that have explored the link between overseas
private investors and the performance characteristics of Australian residential property markets. In
order to examine this link, variables including both traditional economic factors and non-traditional
factors for the selected Melbourne residential property markets shall be incorporated in the
modelling of the residential property market in Australia. This will be analysed alongside specific
variables such as economies and financial determinants covering interest rates, exchange rate,
tourism arrivals and education enrolments for specific time frames etc. The study period will be
from year 2002 to 2013, amidst growing and inevitable globalization of the world economy. This
33
period also represents an interesting phase of Chinese cross-border real estate investment activities
subsequent to the GFC in 2008. The series data will be analysed so as to determine the relationship
between these determinants and the house prices in two specific suburbs in Melbourne.
Although the assessment GFC 2008s impact on the Australian residential property market would
have been more reflective if comparison was made on the secondary data analysis before and after
GFC 2008, inadequate data points subsequent to GFC 2008 might result in inferior regression
modelling. As a result, quarterly secondary data from 2002 to 2013 was collected in this study to
enable effective quantitative analysis with adequate data points. Collection of Chinese secondary
data to assess the Push factors exerting buying pressure on Australian residential properties was
challenging due to limited data availability, especially when secondary Chinese data would have to
be collected from third party sources such as OECD and IMF.
In this study the entities of interest are the residential housing markets in two specific Melbourne
suburb markets. Melbourne and Sydney are now comparable to world cities like Singapore, London,
Shanghai and Vancouver. The same classification (informal) used by Economist Intelligence Units
(EIU) 2013 Global Liveability Survey has been embraced for this study. Comparison of other leading
cities, even though they may behave like Melbourne, is beyond the scope of this study. In order to
enhance the relevance of this study, related market reports and commentaries on the Australian
residential property market up until 30th June 2015 shall be incorporated. Simultaneously all
secondary data series will be updated until June 2014.
1.6 Thesis outline
This chapter has introduced the study; Chapter Two will document the review of the relevant
literature, Chapter Three will outline the research design and methodology, Chapter Four will
present the results and discuss the findings, and Chapter Five will present the conclusion.
1.7 Publications and Presentations
Result from Chapter four on the quantitative research and findings was presented and published in
Pacific Rim Real Estate Society (PRRES) conference 2016. As part of the research effort, the thesis
was also presented PRRES 2015 international conferences on Chapter one to two, including
doctorial colloquiums. The quantitative research and findings was presented at the Global Chinese
Real Estate Congress Conference (GCREC) 2016 in Hangzhou, China, July 2016. An invitation from a
leading Australian global property consulting firm was received to present on the research results in
2016. In the middle of year 2016 an invitation was received from the Australia China Alumni
Association Alumni and RMIT Alumni to present the research findings, titled Knowing the Future
34
Property Owner. Since late 2015 and early 2016, the research outcomes were published in various
leading newspapers such as the Australian Financial Review and Domain as listed below. These
publications had simultaneously attracted substantial attention over hundreds of China online news
portals as listed in Appendix V.
Citations for the conference and doctorial colloquium include:
WONG, P. 2016. The Drivers of Overseas Investment in Australian Residential Property Market.
Pacific Rim Real Estate Society. Sunshine Coast, Queensland. Available: http://
www.prres.net/papers/Wong_Drivers_of_oversears_investment.pdf.
WONG, P. 2016. The Global Cross Border Investments in The Australian Residential Property
Market. Global Chinese Real Estate Congress Conference. Hangzhou, China.
Citations for news publications include:
Hughes, D. 2016. Middle Class International Homebuyers Push Up Prices Near Schools, Universities.
Australian Financial Review. 29 December 2015, Melbourne, Australia.
Hughes, D. 2016. How Property Investors Can Get Top Financial Results from Student Housing Crisis.
Australian Financial Review. 5 February 2016, Melbourne, Australia.
Hughes, D. 2016. Sydney and Melbourne Property are Set for Price Correction. Australian
Financial Review. 19 February 2016, Melbourne, Australia.
Power, E. 2016. From China, with Love: The Residential Tourists Falling for Melbourne Property.
Domain. 6 March 2016, Melbourne, Australia.
Power, E. 2016. Are Rich Indian Buyers the Next Big Thing in Australia Luxury Real Estate? Domain.
13 March 2016, Melbourne, Australia.
See Appendix V for publications over the China online news portals, as compiled by News RMIT.
35
Chapter Two:
Literature Review
2.1. Introduction
Foreign investment in Australia constitutes one of the major components of the Australian
economy, with FDI amounting to USD50 billion invested in the country in 2014. As Australia gets
more exposed and impacted by the global liberalisation subsequent to GFC 2008, it is crucial to
investigate foreign investors appetite and their attitude towards Australian real estate.
This chapter aims to examine and review the literature on international investment fundamentals,
decision making theory (resources allocation, selection and optimisation), investment activities
(evaluating and estimating asset performance) and determinants related to foreign investments in
the Australian housing market. Both FDI and Foreign Portfolio Investment (FPI) theories will be
evaluated in the context of historical offshore investments in Australian real estate. International
studies relating to outward FDI from the host countries such as the US and China shall form part of
the review to examine core drivers that encouraged outward offshore investments. The objective is
to identify who were these offshore private investors and what factors affected and shaped their
decision making relating to Australian residential properties subsequent to GFC 2008.
This study will place emphasis on offshore private investment in Australia. The historical
immigrations that impacted the Australian housing market is a major platform soliciting empirical
evidence on the core drivers of foreign private investment in Australian residential properties.
Empirical evidences that revealed determinants of foreign investment in the Australian housing
market, for example international students in Australia is reviewed and examined underpinning the
basis of this study.
Besides examining the historical empirical evidences, it is the emphasis of this study to review
recent publications in literature, market commentaries, reports and government documents
subsequent to GFC 2008 relating to the foreign investment characteristics in Australia. Emerging
trend and habits of foreign investors in Australia is identified and uncovered to form the platform
for testing in Stages IV and V of this thesis.
This chapter has seven sections. Subsequent to Section 2.1 introduction, Section 2.2 outlines the
international investment fundamentals. Section 3.3 presents the overseas residential property
market determinants to identify various historical investment drivers. Sections 2.4 and 2.5 depict
36
the Australian population growth and the related migration investment activities. Section 2.6 details
the identified emerging offshore investment trends and the entire chapter will be concluded in
section 2.7 summary and implications with research gaps identified.
2.2 International Investment Fundamentals
Traditional investment patterns and analysis focuses on potential gains from combining different
stocks into a single portfolio. Recent research has been extended into currencies, real estate,
international stocks and bonds in portfolio investment. In this global liberalisation era, the potential
benefits derived from the international real estate in investment strategies resulted in the inclusion
of real estate as a common asset class in any international investment portfolio analysis (Sirmans
and Worzala, 2003).
Giliberto (1990) concluded that in a broader context of diversification of mixed asset portfolios,
investment in real estate was perceived to have an offsetting effect on the negative consequences
of excessive concentration in equities, especially when considering the relative correlation of
equities prices in international financial markets. He asserted that lack of correlation of returns
among real estate assets in different countries justifies the diversification approach. Other empirical
studies seem to suggest that international real estate investment could be regarded as a hedge
against excessive risks associated with equity investments (Fereidouni and Tajul Ariffin, 2013 2006,
Hoesli, 2004, Moshirian, 1999, Sirmans, 2003, Wilson, 2003).
The International Monetary Fund (IMF) defines FDI in the fifth Balance of Payments (BOP) manual as
a type of international investment with the aim of a long lasting involvement in a business in
another country. The concept of long lasting involvement implies a long relationship between the
investor and the foreign firm and a significant influence upon the management of the latter.
Following these recommendations FDI data in the BOP statistics were grouped under the following
headings: acquisitions of shares over 10% of capital stock, intra-firm loans and Foreign Real Estate
Investment (IMF, 1993).
It is seemingly common that FDI activities are diversifying into real estate investment as another
important asset class investment. The real estate assets category offers investors another viable
investment option to diversify and solicit better investment returns. Investment in real estate was
perceived to have an offsetting effect on the negative consequences of excessive concentration in
equities and bonds in a world of uncertainty. This was highlighted by Quan and Titman (1999),
comparing direct real estate assets against other types of investments, in particular the share
markets in the various countries. In the later research real estate assets were added to a mixed
37
asset portfolio along with shares and bonds as part of the investment asset class (Hoesli et al.,
2004).
Moshirian and Pham (2000) exploited determinants of US investments in real estate abroad based
on FDI modelling, by comparing FDI in real estate as a subset of FDI in general. They included specific
explanatory variables such as financial wealth, return from the US stock market, US financial
liabilities, bilateral trade and economic growth. They had validated the FDI platform for the
assessment on other relevant explanatory variables. In this paper, all the specific explanatory
variables listed above were the determinants of US investments in real estate abroad.
It was quite apparent that portfolio theory as an established driver of foreign investment capital
flows was not the only theory applicable, especially in this globalization era. There were other
variables considered to be influential and had been selected as relevant contributors in the studies
of foreign real estate investments. In relation to studies of FDI in real estate market, Holsapple et al.
(2006) claimed that FDI and Foreign Portfolio Investment (FPI) were traditionally treated as mutually
exclusive, and researchers generally focused on only one or the other. While this approach may be
appropriate for some types of investment, real estate investments were often hybrids that possess
characteristics of both FDI and FPI. The research synthesized existing theories of FDI and FPI into one
methodological approach in the case of investment in real estate. The authors extended Dunning
(1997) Eclectic Paradigm to allow for independent and aggregate evaluation of both FDI and FPI
characteristics to enhance decision making regarding foreign real estate investments.
Although the term Foreign Real Estate Investment (FREI) had been widely used by researchers, it
had not been truly defined. According to international standard and industrial classification of all
economic activities provided by the United Nations, a real estate sector is classified under service
(tertiary) sectors. According to Topintzi et al. (2008), direct real estate investments involves
investment and management of actual tangible real estate. FREI was further defined to include fund
inflows from individuals as well as foreign enterprises, whenever these entities do not maintain a
permanent residence in the host country. FDIs definition by IMF and the fundamentals articulated
around FREI underpinned the foundation for all research efforts of investigating various
determinants of foreign real estate investments.
Empirical investigations conducted thus far suggested that there was an apparent lack of studies
conducted on the FREIs determinants from the perspective of a direct FDI model (Rodrguez and
Bustillo, 2010). Early research examined individual real estate markets employing relatively crude
proxies for real estate values derived from rental rate growth (Ross and Webb, 1985). Among the
38
theories that were mentioned, the main approach used for FREI studies so far was mainly based on
Portfolio Theory as advocated by (Markowitz, 1970). In later studies conducted by the researchers
and scholars, the majority found that diversification would be more likely to produce benefits in
markets that were not perfectly correlated, although there was a degree of variability depending
upon the countries being examined (Moshirian and Pham, 2000). The research revealed that most
recent studies of FDI were based on the eclectic theory as a means of measuring the most significant
determinants of FDI.
For example, currency risk represented as one of the distinct disadvantages of foreign real estate
investment. Capital gains derived from disposal of these foreign estates occurred at a specific
moment of time or when the property was sold, gave rise to higher foreign currency risk in
comparison with equities or bonds investments. Institutional investors might be able to mitigate the
currency risk through hedging. However, hedging would not be as easily accessible for individual
investors compared to institutional investors (Johnson et al., 2006). Empirical works were carried
out to find suitable ways of hedging against currency risk when investing in real estate. Ziobrowski
et al. (1997) suggested employing currency swaps to avoid excessive currency fluctuations, whereas
other authors like Hoesli et al. (2004) preferred to use forward contracts to eliminate the currency
risk.
A review of historical literatures will be incomplete without examining some of the recent property
market models. Reference is made to Baum and Hartzell (2012), who noted that international
property investment could be complex, primarily because of the impact of tax and currency issues
and other barriers that place non-domestic buyers at a disadvantage. They went on to suggest that
both the theory and empirical evidence suggested a strong long-term correlation between rents and
inflation. Furthermore, they elaborated that delivery of good and steady real returns from the real
estate requires excellence in the investment process as follows:
i. Understand the nature of the asset class.

ii. Being able to develop and execute a strategy that captures the assets attractive
characteristics.
iii. Using vehicles and structures that do not wreck the propositions.
iv. Avoiding unmanageable and poorly-understood international risks whilst making the most
of the opportunities for diversification and return that are presented.
v. Knowing at what price to buy.
Source: Baum and Hartzell 2012
39
A study conducted by Rodrguez and Bustillo (2010) examined the determinants of FREI inflows for
Spain over the period 1990-2007 and applied the Engle-Granger co-intergrating regressions. They
used time series data to run the three models namely, financial model, the demand for service
model and the eclectic model.
Archer and Ling (1997)s three-market model illustrated the critical relationship of property, space
and capital markets. The paper suggested that instead of merely linking space and capital markets in
both short and long run setting, it should be expanded to a three-market model by separating
specific property risk components from the general capital market. It is believed that various aspects
of monitoring and controlling on the cost and benefit of FREI in a property market can be assessed in
a systematic manner using this model (Higgins, 2013).
To summarise, neither the portfolio approach nor the direct investment focus offered a satisfactory
explanation of the foreign investment in property market. In this study we propose to discuss the
foreign real estate investment from the portfolio perspective, together with other relevant
explanatory variables, to investigate the relevant determinants for the real estate market in
Australia. Real Estate in general or housing investment in particular can be considered as financial
assets, whose price changes would influence the direction and quantity of cross border financial
movements. Investors expectation of potential increase in house prices was one of the main factors
that affected the international financial flows. In fact, the majority of empirical studies had
attempted to explain real estate investment by focusing on the financial factors.
2.3 Overseas Residential Property Market Investment Determinants

2.3.1 Factors Attributable to Foreign Investments in Property Market
Existing economic literature suggests that FREI (like FDI in other services) would assist a host
countrys economic development by ways including injection of financial resources, provision of
services in terms of supply, cost, quality and variety, introduction of additional competition,
generation of employment and delivery of technology into the real estate industry (Arnold et al.,
2006). It is believed that FDI inflows had affected the performance of the real estate industry in
host countries significantly (Jiang et al., 1998). For example, FDI in real estate had contributed to the
rapid modernisation of the metropolis and facilitated and enhanced the urban development quality
in China (Wei et al., 2006).
He et al. (2011) suggested that foreign real estate investors had contributed significantly in the in
the development of Chinas real estate industry. Besides providing the much needed capital
requirement, the FDI had educated the domestic real estate professionals on new practices in the
40
operation of the real estate market. Fung et al. (2010) claimed that since 1997, the investment in
Chinas real estate sector by domestic and foreign investors was the major driver of Chinas
economic growth. The spill over effect resulted in demand stimulation on many other industries
such as electronic, machinery, steel and architecture in China.
Efforts to investigate the negative impacts of FDI in the real estate market were equally voluminous.
Research conducted by Murphy and Watson (1994) suggested that although FDI were blamed as the
main reason of declining housing affordability in Australia major cities, the issue was in fact more
complex and the effects of economic restructuring were significant as a result of FDI into Australia.
One of the reasons quoted was the deregulation of financial markets in the 1980s made finance
more accessible for housing resulted in demand-push price inflation across Australia.
Evidence from literature had repeatedly confirmed the benefits and various positive impacts of FREI
in the host countries. These empirical evidences had validated positive impacts derived from FDI in
real estate market and seem to have surpassed the negative aspects. Evidently, countries around
the world are in constant competition with each other to lure foreign investment capital. Table 2.1
depicts various studies conducted on the FDI in real estate trends in the world markets:
Table 2.1: Trends of FREI in the World Real Estate Market
Locations FDI in Cross Border Real Estates Source

Global Global FDI in real estate in 2010 are approximated in USD316 billion, Jones Lang LaSalle (2011)
which is more than 50% higher than 2009 level
FREI accounted for 37% of the worlds Brown and Matysiak
wealth (2000)
China FDI flows into China's real estate market accounted for 10-15% of He et al. (2009) and
the total FDI from 1990s to 2009. The real estate sector attracted Chen (1996)
Substantial FDI in China over the period 1983- 1992.
Lebanon 32% rise in FDI inflows in 2008 was mainly driven by real estate UNCTAD (2009)
investment
Spain FREI in Spain represent nearly 40% of total FDI inflows Rodriguez and Bustillo
(2010)
Vietnam FDI accounted for 54% of total Vietnam FDI in 2008 Thien Thu and Perera
(2010)
Europe Cross border investments accounted for 63% of the total real estate Jones Lang LaSalle (2007)
transactions in Europe in 2006
Finland Cross border investments accounted for half of the annual total KTI (2008)
transactions in Finnish commercial real estate markets
Serbia FDI in real estate made up 12% of total capital inflow in Serbia Popov (2010)
Costa Rica The purchases of real estate by private foreign citizens reached
USD763 million or 25% of the total FDI in Costa Rica
Source: Adapted by Fereidouni and Masron 2013
41
The real estate markets in some countries in the world, referring to Table 2.1, were all experiencing
robust development due to FREI (Fereidouni and Masron, 2013).
The literature review revealed that most studies conducted were focused on determinants of
overseas investments into the host countries real estate market. Moshirian and Pham (2000) took a
somewhat different approach by examining the factors contributing to the outward expansion of
United States of Americas FDI in real estate abroad. The research showed that as US foreign
financial liabilities increase, there is an accompanying increase in its FDI in real estate offshore. This
result is consistent with the study by Ruffin and Rassekh (1986), which showed that US FDI abroad
was a substitute for US financial assets. Furthermore, the empirical results indicated that as returns
from the US stock market decline, there were more incentives for US investors to invest in foreign
real estate. The empirical results also showed that US financial wealth, US FDI in manufacturing and
banking and US bilateral trade contributed positively to the expansion of US FDI in real estate.
A review of FDI literature appears inadequate without study into the literature that highlighted the
determinants of significant FDI inflow into China. China, like many other developing countries,
regards FDI as a dynamic force in economic growth and urban development. With the
implementation of various economic decentralization measures to push for further growth, the
significance of the FDI in its major cities was regarded as one of the major contributions to the
impressive growth in China for the past decade (Wei et al., 2006).
According to Wei et al. (2006), the role of establishing various official states and development zones
played a significant role in the formation of Chinas current city landscapes. The states in China had
been actively implementing favourable policies to attract foreign investment in their effort of
establishing global cities in their respective states/zones. They competed vigorously with each
other over policies and resources made available to foreign investors. Shanghai is the success story
of China policies favouring FDI, as it has become one of the most preferred location for foreign
investment and the regional headquarters for major transnational corporations in Asia. The research
analysed the relationship between the change of state policy and foreign investment inflows. The
research concluded that the important role of the state policy in attracting FDI and resultant effect
of a global city formation like Shanghai. Despite decentralization and globalization, the individual
states in China still played an important role in attracting foreign investment alongside with urban
restructuring.
In the midst of many scholarly studies conducted on the determinants of FDI in the world real estate
markets, Ross (2011) iterated that although there had been substantial research carried out on the
42
FDIs impact on the overall real estate market, the same cannot be said for the Australian residential
property market. He revealed that the constituents of Australias property sector had been
previously studied at an aggregate level and but not at an individual property asset class level.
According to Ross (2011), with the Federal Government bearing the main responsibility of
monitoring foreign investment through its Foreign Investment Review Board (FIRB) processes, the
approach of State Governments can only be described as somewhat different and lacking from
those provided at the Federal level. It was not surprising that the availability of both quality data
and literature pertaining to FREI in residential housing market in both Sydney and Melbourne were
limited, thus presenting an extant knowledge gap.
Assessing the performance characteristics of FREI and real estate market is fundamental to both
investment decision making (resources allocation, selection and optimisation) and investment
activities (evaluating and estimating asset performance). Overseas Investors use a range of
performance measures to assist them in making investment decisions (Markowitz, 1970). These
measures include specific risk and return statistics, which are analysed in order to determine the
performance characteristics of different asset classes. From the review of portfolio literatures, it is
apparent that FREIs unique purpose is to solicit higher returns (Rodrguez and Bustillo, 2010).
Instead of analysing a broad range of heterogeneous determinants of FREI in the residential housing
market, this study will focus on investigating specific factors that drives Asia Pacifics private wealth
into Melbourne residential real estate market investments. China is used as the case study due to
the recent sizeable influx of both tourism arrivals and student enrolments. The three-market model
illustrated by Higgins (2000) emphasised the critical relationship between property, space and
capital markets and presented a platform for analysis on factors such as real estate transparency,
financing cost, property prices, per capita income, the education system, tourism arrivals with
emphasis being placed on immigration, education and tourism as variables of interest. Analysis of
non-economic variables such as personal preference and social attributes is considered to be
outside the remit of this paper.
This study is therefore an extension of the prior literature and makes allowance for emerging factors
and determinants of FREI in the host country. When combined with the existing set of variables,
these emerging determinants subsequent to GFC 2008 potentially provide a better explanation and
prediction for the recent trend of foreign real estate investments in the Melbourne residential
market.
43
2.3.2 Local and Overseas Government Property Market Policies
Keynes (2006) stated that governments were capable of influencing the aggregate demand of the
country over which it had power by implementing fiscal policies, including changes in tax rate and
spending, alongside the monetary policies associated with the management of money supplies.
Among the studies conducted on how significant the impact the government policies had been on
the world countries economy, Nordhaus (1975) presented a simple yet powerful theory: Presidents
in the US used many policy tools at their disposal to manipulate the economy for their electoral
gain. Among the numerous studies conducted subsequent to Nordhauss, researchers had gained
grounds in identifying various political business cycles in different countries and locations. Generally,
there are three major concepts to the political business cycle literature:
i. The classical models that were focusing on four macroeconomic indicators: growth,
inflation, unemployment, and income.
ii. Short term economic instruments or manipulations such as tax benefits.
iii. Monetary policy through the Federal Reserve (Fed) as an independent bureaucratic agency,
although debates over how independent is the Fed is on the rise.
Source: Ladewig 2008
Review of Government policies in respect of foreign investment depicted that historically, countries
had been adopting specific governing policies which they perceived would optimise the investment
atmosphere and maximise FDI into their country. Governments at times have to overhaul their
policies to facilitate various factors including globalisation, economic reforms, meeting the needs of
changing market conditions and investors demand. Due to the shares and bonds sectors had been
underperforming especially during the GFC 2008, a trend had emerged to encourage or promote FDI
investing into real estates as an alternative class of investment assets.
Moshirian and Pham (1999) paper titled Determinants of US Investment in Real Estate Abroad
presented an opposite perspective of foreign investments in real estate market by analysing factors
which were contributing to the outward investments of US FDI in overseas real estate. They
conducted studies on various attributes that caused US investors opting for investment in overseas
real estate market. As a result of US fiscal and monetary policies, there was an increase in real
estate investment abroad as a substitute for US financial assets when US foreign financial liabilities
increase. The empirical results indicate that as returns from the US stock market decline, there were
more incentives for US investors to invest in foreign real estate. The empirical results also showed
44
that US financial structure and wealth, US FDI in manufacturing and banking and US bilateral trade
contribute positively to the expansion of US outward FDI in real estate.
For inbound investment, He et al. (2008) claimed the existence of a fear factor among the Americans
due to the rising Chinese political and economic power. Chinese economic growth for the past
decade seems to have exerted some anxieties among other countries including US. The trade
imbalance was seen as an indication that China was edging over US in terms of BOP and would
eventually overpower the US economically. He et al. (2008) argued that Chinas FDI in the US was
more economically than politically driven and therefore should be understood from a business
rather than political perspective.
According to Cheng and Ma (2010), Chinese firms had taken on a more capitalist perspective that
resulted in radical restructuring and corporate mergers since the 1990s after three decades of
economic reforms. Consequently, China companies had emerged more diversified in their
ownership structure. Although the Chinese government remain insistent in maintaining their
ownership control over international companies like Lenovo, their involvement in the strategy and
operation of those companies is diminishing. Factors that caused China to invest overseas were
steep domestic competition, declining domestic revenue, supporting future export, opening up new
markets, securing raw materials, acquiring technology, acquiring global brands. Importantly, all
outward FDI from China is supported and encouraged by the Chinese government policies. Deng
(2004) revealed that with China, sustained economic growth was the result of substantial foreign
capital inflows. The economic growth had resulted in a large current account surplus, huge foreign
reserves and a high level of domestic savings. Consequently, the FDI outflows from China into the
international arena were primarily a function of macroeconomic policy and constituted an inevitable
path of Chinas economic development. The world would continue to observe increasing FDI from
China to other parts of the world in the foreseeable future. Chinas individual firms will continue
investing in overseas to reap the ownership advantages and the associated international
competitiveness derived from it.
Review of the literature provided a sound perspective on the factors that drove Chinas investors to
stretch their arms into overseas markets. The research conducted on the offshore investment in
Australias residential property market, particularly investment from China, would be incomplete
without reviewing the various Chinese Governmental policies that had resulted in large outward
investments from China into overseas real estate markets.
45
Adopting an investor friendly economic policy is a common reform option for many countries to
attract FDI. Australia is certainly not left behind in this aspect. History revealed that between 1985
and 1991, tourism and real estate FDI accounted for over 50% of all Japanese FDI into Australia,
peaking at 93% in 1988. During these periods, Australia, adopting the policy of encouraging business
migration, has experienced large inflows of capital, much of which has been invested in property
(Murphy and Watson, 1994).
Australias migrant intake policies has changed and increased progressively since the recession of
the early 1990s. In recent decades, immigration has been somewhat less sensitive to fluctuations in
the business cycle (as evidenced by continuing high levels during the Global Financial Crisis) and
more responsive to economic restructuring. Evidently as a result of various government policies
restructuring, the long boom from the mid 1990s has been accompanied by a relaxation of
migration quotas. Migrant intakes had increasingly favoured younger applicants with tertiary
qualifications in areas of labour shortage and strong language skills. Skilled migration has increased
relative to family-based migration. The share of family migration fell from 47% in 199899 to 40% in
200102 while the skilled intake rose from 51% to 57%. The growth of migration was the outcome
of the Howard Coalition Governments attempt to extract greater economic benefit from migration
to garner public support for the programme (DIAC, 2004).
A trend had emerged whereby the investors friendly migration scheme was put in place to attract
significant foreign capital into the local real estate market in Australia. Burnley et al. (1998) looked
at various Governmental policy implications on urban outcomes in relation to Australias
immigration programme. The Australian policy makers recognised the diverged views on the costs
and benefits to the nations major cities such as Sydney and Melbourne due to large scale
immigration; and the response had since been intensified and sharpened.
Higgins (2010) illustrated the extent of Government policies impacts on the Australia housing
market by examining the structure of the property market. This study adopted the Archer and Ling
(1997)s three-market model and was simplified to exemplify the critical relationships between
property, space and capital markets in assessing the Australian government policies influence over
the house prices. Figure 2.1 illustrates a simplified Archer and Ling model.
46
Figure 2.1: Archer and Ling Three Markets Model
Source: Higgins 2010
Figure 2.1 illustrates Governments influences across the property, space and capital markets. Some
of the government policies that influenced the Australia house prices are presented below:
i. Space market (Demand)
a. Population Policies (quotas on overseas migration).
b. Incentives for first-time home buyers.
c. Opportunities for offshore purchase of residential properties.
ii. Capital market (Finance)
a. Monetary Policies (money supply, government bonds).
b. Changes in property taxes (negative gearing, stamp duty).
c. Regulations that impact on alternative asset classes.
d. Changes in superannuation policies (in an indirect manner).
iii. Property market (Property market conditions and supply)
a. Release/rezoning of new residential land.
b. Changes in planning policies(housing density).
c. Building regulations (sustainability agenda).
Source: Higgins 2010
Based on the literature review on potential influences over the investment climate implicated from
both local and offshore Government policies, it is believed that an additional platform should be
introduced into the simplified Archer and Ling model to enable an insightful review of FDI (real
estate) determinants. This new model will allow a more comprehensive review on how Government
policies, from both angles of overseas Government policies and local Government policies, impact
on the host countrys real estate market. It is envisaged that this model can be utilised for future
47
case studies of various factors that incentivise overseas outward investments into the host country
property market. Figure 2.2 presents the proposed Push & Pull model:
Figure 2.2: Proposed Push & pull Model
Source: Author
Figure 2.2 illustrates, besides the home Government policies, there presents an additional
component asserted from overseas Government policy pushing influences to the space and capital
markets of the host country. Overseas Government policy examples which can potentially impact on
the Australia property prices include:
i. Space Market (Demand)
a. Wealth preservation and hunger for safe haven assets.
b. Migration (searching for better life style).
c. Education (inadequate tertiary places in local universities).
d. fierce local competition and declining domestic revenues.
ii. Capital Market (Finance)
a. Relaxation of capital outflow restrictions.
b. Higher purchase and capital taxes as well as mortgage restrictions.
c. Overseas government encouragements and financial support.
Source: Deng 2004, RBA 2013, Savills 2013
Based on a literature review on foreign investment fundamentals, it appears that there have been
limited studies conducted on offshore private wealth investment into the Australian residential
property markets alongside the emerging determinants that attracted these offshore investors
repositioning investments into Australia, subsequent to GFC 2008. The three main gaps in the
literature on the foreign investments in Australia residential market have been documented in the
following questions:
48
i. What were the rationales for offshore investors defying the normal risk adverse
investment strategies and repositioning their investments into the Australian residential
property market?
ii. What are the emerging determinants to drive offshore investors buying into residential
property market in Australian major cities like Melbourne beside the conventional
financial and economic factors?
iii. Did non-traditional and emerging determinants play a part in attracting offshore
investments into Australian residential property market and if yes, what are these
determinants?
2.4 Population Growth and Offshore Investment
According to ABS (2008), annual population growth is the change in the Estimated Resident
Population (ERP) in a single year caused by the combination of net overseas migration and natural
increase. The official population measure used by the Australian Bureau of Statistics (ABS) is the
estimated resident population. This is based on the population usually residing in particular
locations and includes all people, regardless of nationality or citizenship (with the exception of
foreign diplomats and their families), who have lived in Australia for 12 out of the past 16 months.
Population growth refers to the change in the estimated resident population over a period of time.
The two major sources of population growth are defined as:
i. Natural increase - the population growth that results from the difference between the
number of live births and deaths over a specified period.
ii. Net overseas migration - as the difference between those who have stayed in, and those
who have been absent from, Australia for at least 12 out of the past 16 months. It is affected
by both temporary and permanent migration to and from Australia
Source: ABS 2012
Figure 2.3 shows the total of Australian quarterly population growth from January 1983 to January
2013. The total population growth is categorised accordance with the quarterly growth due to
Natural Increase and Net Overseas Migration.
49
Figure 2.3: Components of Australian Population Growth

500
450
400
350
300
Number '000
250
200
150
100
50
0
Jan-1990
Jan-2007
Jan-1983
Jan-1984
Jan-1985
Jan-1986
Jan-1987
Jan-1988
Jan-1989
Jan-1991
Jan-1992
Jan-1993
Jan-1994
Jan-1995
Jan-1996
Jan-1997
Jan-1998
Jan-1999
Jan-2000
Jan-2001
Jan-2002
Jan-2003
Jan-2004
Jan-2005
Jan-2006
Jan-2008
Jan-2009
Jan-2010
Jan-2011
Jan-2012
Jan-2013
Population Growth Net Overseas Migration Natural Increase
Source: ABS 2015

According to Figure 2.3, the contribution to population growth for the year 2013 was higher from
net overseas migration (59%) than from natural increase (41%), though the net overseas migration
contribution to this growth actually decreased slightly from 60% for the previous year ending 30
September 2012. The corresponding natural increase had increased slightly from 40% over the same
period.
Net migration growth had been a major component of Australian population growth since 1988. In
year 2006, Australian population growth due to net overseas migration surpassed the natural
growth and has persisted ever since. In effort to provide a better understanding on the last two
decades of Australias population growth and its relationship with the Australian historical
immigration and Foreign Investment activities, assessment of the Australian population growth
forms the immediate step. Figure 2.4 presents an overview of Australian population growth from
1901 to 2011:
50
Figure 2.4: Australias Population from 1901 to 2011

25,000,000
20,000,000
15,000,000
Number
10,000,000
5,000,000
-
1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 2011
Source: ABS 2015
Figure 2.4 shows that Australian population increased consistently since 1901. A century of
population growth observed three significant expansions between 1961 to 1971 (red bar), 1981 to
1991 (yellow bar) and 2001 to 2011 (green bar). Australian population growth exceeded two million
for each of these three decades. The population grew 2.56 million for the period 1961 to 1971 and
another 2.36 million between the periods of 1981 to 1991. Australia's ERP reached 22.30 million at
30 June 2011, increasing by 2.90 million people or 15% since 30 June 2001.(ABS, 2008, ABS, 2011).
The significant population growth driven by immigration programmes into particular host countries
is common throughout the worlds major cities. (Jupp, 1995, Vamplew, 1987) established that
immigration has a direct influence on the increment in the host country population. They had also
provided empirical evidence on how Australias population was affected by immigration
programme. Immigration had been the major source of Australias population growth since the
white settlement policies (Burnley et al., 1998, Collins, 2008, Department of Immigration and
Citizenship, 2009-2010, Jupp, 1995, Wilson, 1998). For example in 1851 where the Australian
population was 437,655, of which 77,345, or just under 18%, were Victorians. A decade later the
Australian population had grown to 1,151,947 and the Victorian population had increased to
538,628; just under 47% of the Australian total and a sevenfold increase. The rapid growth was
predominantly a result of the gold rushes (Vamplew, 1987).
51
Australia had played a visible role in the process of diaspora dispersal over the period of almost 20
years since the 1990s. As a result, migrant intakes grew substantially during the 1990s and have
reached an all-time high through much of the early years of the 21st century. This acceleration built
upon a long history of post-war migration into Australia. Combined with higher birth-rates amongst
the Australian born migration, the likelihood of continuing population growth over the subsequent
decades was greatly enhanced. A population of almost 36 million has been proposed as a realistic
prospect by 2050 (O'Reilly, 2007).
Empirical evidence revealed that the population growth was closely related to the implementation
of several Australian Government immigration programmes historically. In this aspect, (Vamplew,
1987) provided empirical evidence that immigration policies were the main reasons attributed to
the increase in overseas migration to Australia. The fifth decade (1980-90) started with series of
Australian government immigration programs that resulted in migrations exceeding 100,000 for the
198687 year. Prime Minister Bob Hawke proclaimed 1989 as the Year of Citizenship and people
eligible for Australian citizenship were encouraged to apply. In 198990, more than 130,000 people
were granted citizenship. In 1991, the Access and Equity Plan was released, aimed at ensuring all
clients had fair access to the department's services (Department of Immigration and Citizenship,
2009-2010). The Australian Government immigration policies implemented during these periods,
1986 to 1991, had assisted in the increased migration activities into the country in a substantial
manner. The population growth in the 1990s was a substantial 2.36 million as shown in Figure 2.4.
Numerous studies had also established that immigration played a significant role in lifting the host
countries FDI (Borjas, 1994, Collins, 2008, Ley and Tutchener, 2001, Wilson, 1998). The increase in
immigration activities in the host countries had also directly impacted on its real estate market on a
macroeconomic perspective (Bartel, 1989, Borjas, 1994, Collins, 2008, Ley and Tutchener, 2001). In
order to demonstrate the impacts of immigrants towards the Australian FDI historically and to
exhibit the relationships between the two, Figure 2.5 is used to illustrate the share of FDI in
Australias yearly total GDP from 1960 to 2010.
52
Figure 2.5: FDI by Financial Year, as a Share of GDP Australia
FDI/GDP
Source: ABS 2011

Figure 2.5 shows that the FDI into Australia, as a share of GDP had increased most significantly
during the period of 1985 - 1990, 1998 2003 and 2005 to 2010. In effort to demonstrate the
relationship between historical FDI activities and some major historical migration events in Australia,
this study compares the significant FDI increment periods between 1985 - 1990 and 1998 - 2010 as
per Figure 2.5 to the various major historical Australian immigration events as detailed as follows:
Before 1960
Between the 1880s and the 1960s, Australia deliberately insulated itself from its geographical region
by adopting the White Australia Policy (Willard, 1967).
1966 -1973
The rapid increase of Asian immigrants was also due to the abolition of the White Australia Policy in
1972, under Prime Minister Gough Whitlam. All restrictions include the State laws which
discriminated against Aborigines, prohibitions on non-European residents including prohibition on
the acquisition of citizenship, without which people were often barred from property ownership or
certain occupations have been removed and racial discrimination was outlawed under a variety of
State and Federal laws, starting with the South Australian Act of 1966. The policies of racial
exclusion and immigrant assimilation were abandoned by the Liberal and Labour Governments with
little political resistance (Jupp, 1995).
53
1985 -1991
The period between 1985 and 1991 was marked as an important milestone in Australian economic
history in relation to both the migrations and FDI in Australia. It was during this period that the
Foreign Investment Review Board (FIRB) unveiled its relaxation of restrictions on the need for local
partners (Farrell, 1997). The policy liberalisation came about in response to the growing evidence of
benefits brought by foreign investment. Since the 1988 Fitzgerald Inquiry the quota for skilled and
business migrants had risen compared with the quota for family reunions. The foreign direct
investments contribution to the Australian economy was substantial during this assessment
periods.
1998 -2007
Australia accepted 87,000 immigrants in 199495, the last financial year before the Howard
Government was elected. Although immigration suffered a reversing trend initially during Howard
Government which saw the planned immigrant intake reduced to 68,000 following the election of
John Howard in 1996, immigration activities observed another significant growth since 1998. The
main reason for the reversed immigration trend was due to the Howard Government's changed
nature of immigration. The Howard Government introduced new immigration policies of reducing
the role of family reunion and emphasising the possession of skills that were in short supply. The
guest worker program of issuing long-stay temporary business visas, where skilled workers
nominated by a potential employer are permitted to stay up to four years was also issued. The
Howard Government had also made several changes to make it easier for overseas students to stay
on after they graduated (Gittins, 2007). As a result, 2006 was the eighth straight year of net
immigration (that is, net of permanent departures) in excess of 100,000.
Empirical studies seemed to be in congruence in uncovering that the Australian population growth
for the last century, attributable to the Australia government immigration policies and the influx of
migrants money invested in the country, had a direct relationship with the substantial foreign
investments into the country for the same period of time.
2.5 Migrations and Real Estate Markets

In 1988, Japan real estate investment in Australia became the first major real estate market
component of the total FDI in Australia. According to Farrell (1997), Japanese investors were
investing in commercial real estate specifically linked to the tourism industry such as hotels and
commercial properties. This event coincide with Australians policy of encouraging business
54
migration had produced large inflows of capital during the same period (Farrell, 1997, Murphy and
Watson, 1994). The majority of the FDI from the Japanese was invested in the Australian property
market.
Both Farrell (1997) and Murphy and Watson (1994) revealed that Australians policies of
encouraging business migration had produced large inflows of capital, of which much was invested
in property. Among all properties purchased by offshore investors, residential housing market had
attracted much attention and constituted an important element in shaping overall real estate
market development. Ley (2001) disclosed that the direct relationship between migrants and the
residential housing market represented an important attribute in the increasing demand for
residential properties. Empirical studies had also suggested that any assessment would be
incomplete without reviewing the historical perspective of this initial housing demand related to
Australias immigration programs that had grown more in significance as a key economic feature of
Australia since the 1980s (Ross, 2011, Sirmans and Worzala, 2003).
Another study conducted by Bourassa and Hendershott (1995) revealed the direct relationship
between residential housing prices and migration. The far larger coefficient of the growth in
population caused by net migration suggested that immigrants had substantial wealth that they
invested in housing. The fundamental forces driving real house prices were the growth rate in real
wage income (primarily due to employment growth) and the growth in population caused by net
overseas inward migration.
Australia is also one of the most urbanised countries in the world and the migrant intake had been
overwhelmingly an urban affair. Migrants seemed to have a higher rate of urbanisation than other
Australians (Burnley et al., 1998). This link between immigration and urbanisation had prompted a
strong critique based on environmental grounds (Collins, 2008). However environmental aspects
had generated less scrutiny than has been the case in other destination countries including Canada.
Collins (2008) had also suggested that Australia should focus on the impacts of migration on social
networks, families and neighbourhoods and on migrants from various class backgrounds and
experiences. Though constrained by issues of gender, class and culture, migrants should be viewed
as active agents in shaping their own lives.
Among these investing activities a common trend was observed. Migrants seem to favour residential
properties in the metropolitan cities like Melbourne and Sydney. This was consistent with Leyvraz
55
and Redner (2002) observation which suggests that there was a connection between migration-
driven growth to the distribution of city population in U.S. major cities. Burnley et al. (1997)
provided views of various urban outcomes and policy implications of Australias immigration
programme. They concluded that immigration had contributed significantly to the high rates of local
population growth, household formation and suburbanisation.
Review of literature also revealed that there was an apparent lack of emphasis on migrants buying
residential houses for purposes other than owners occupation. The majority of the evidence had
made a common presumption, i.e. that the immigrants had been purchasing residential properties
with the intention of owner occupation without considering other aspects such as investment, life
style, tourism or education. This scenario presented a potential knowledge gap.
Among all these, there appears to be an apparent gap in the studies of the way and the extent to
which the Australia immigration programme had affected the metropolitan cities like Melbourne
and Sydney. The Australian Federal Government is bearing the main responsibility for monitoring
foreign investment through its FIRB processes. The State Governments role can be described as
disparate with most having absolved themselves of any degree of monitoring outside of that
provided Federally (Ross, 2011).
The 2014 FIRBs inquiry on Australias foreign investment policy as it applied to residential real
estate indicated much is needed to be explored of the impacts of offshore investments on
Australian house prices (Economics, 2014). Although this inquiry came as a result of public concern
that foreign investors are becoming more active in Sydney and Melbourne residential property
markets, it indicates the importance of ensuring unwavering implementation of the Government
policies in relation to the residential property market.
2.6 Emerging Foreign Investment Trends

2.6.1 Classes of Private Wealth
A high-net-worth individual (HNWI) in Western society and primarily the Americans private banking
business is defined typically as having investable financial assets (financial assets not including
primary residence) in excess of USD1 million. Ultra-high-net-worth individual (UHNWI) is a person
having investable financial assets (financial assets not including primary residence) in excess of
USD30 million. Figure 2.6 compares the growth in number of HNWIs between year 2013 and 2014 in
the worlds largest HNWI countries.
56
Figure 2.6: Largest Number of High Net Worth Individuals (HNWIs) By Country, 2015
Mexico 125
130
Norway 127
120
Hong Kong 138

124
Kuwait 141
125
Russia 155
160
Brazil 161
172
Soudi Arabia 161

151
Spain 178
161
South Korea 189

176
Netherlands 190
173
India 198
156
Italy 219
203
Australia 226
219
Canada 331
320
Switzerland 343
330
France 494
472
United Kingdom 550

527
China 890
758
Germany 1141
1130
Japan 2452
2327
United States 4351

4006
0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000
Nunber '000
2014 2013
Source: Capgemini 2015

USA still led the world in terms of total number of HNWIs; in 2014 the total number of HNWIs in USA
increased by 345,000 from 4.00 million (2013) to 4.35 million. Japan and Germany ranked second
and third respectively with 2.45 million and 1.14 million of HNWIs in 2014. Chinas HNWIs number is
growing strongly. It had surpassed UK and France to rank number four in year 2014 with 890,000
after a significant growth of 17% in 2014. According to Balakrishnan (2015), by the end of 2014 there
were almost 4.69 million millionaires living in the Asia-Pacific area, 10,000 more than in North
America. North America's millionaires have USD16.2 trillion in the bank, USD400 billion more than
their Asia-Pacific counterparts according to the "2015 World Wealth Report" by the Royal Bank of
Canada and consulting firm Capgemini. The number of millionaires is growing and more than half
that growth is driven by the U.S. and China.
57
Despite the turbulence of the global economy, particularly in the Eurozone, both the population and
wealth of global HNWIs reached significant new highs in 2012. Even though 2012 got off to a shaky
start, HNWIs ultimately benefitted from strong market returns in spite of sluggish global GDP growth
(Capgemini, 2015). Table 2.2 shows the global HNWI at the end of 2014.
Table 2.2: HNWI Wealth Distribution by Region

Region HNWI Population HNWI Wealth
(million) USD(trillion)
Global 14.6 56.4
North America 4.7 16.2
Asia-Pacific 4.7 15.8
Europe 4.0 13.0
Latin America 0.6 7.7
Middle East 0.5 2.3
Africa 0.2 1.4
Source: Capgemini 2015
Table 2.2 reveals that there were just over 14.6 million HNWIs in the world. North America and Asia
Pacific had the highest number of HNWIs, 4.7 million each. North America and Asia-Pacific, the two
largest HNWI regions, drove HNWI global growth, expanding 8.3% and 8.5% respectively in HNWI
population, and 9.1% and 11.4% in wealth. North America lost its lead position as the largest HNWI
market as its market share of 4.7 million HNWI is the same as Asia-Pacifics HNWIs population.
However, Asia-Pacific is home to the majority of the fastest growing HNWI country markets and was
expected to surpass North America again in the near future (Capgemini, 2015).
According to Knight Frank (2014), immigration is playing an increasingly influential role in

determining how wealth moves around the globe. As wealth grows in emerging markets, so does
the desire to protect it. Increasingly, wealthy individuals are looking for places where their assets
will be safe. Investor visas, which grant residency or citizenship in exchange for investment, account
for a small but growing percentage of immigration worldwide. This growth is due to geopolitical
pressures and the need for safety of funds and family. Two of the most popular destinations are the
US and UK. The US has an annual cap of 10,000 investor immigrants and the data shows 2012 was
the first year that figures came close to that limit, with 7,641 investor visas granted more than
double the 3,463 issued in 2011 and almost 10 times the amount issued in 2007. Chinese investors
accounted for 80% of the total, the presence of established Chinese communities apparently
outweighing tax considerations and jitters about gun control.
58
According to Fojtu (2012), due to a confluence of events, including an increase in personal wealth, a
penchant for saving, and an appetite for a western lifestyle, the Asian and primarily Chinese, newly
wealthy are the prime candidates for immigration to the west, particularly to the US. The single-
largest increase in individual wealth in the last two decades has arisen from the east, most notably,
China. Its rate of savings far outpaces the western world due to the lack of social safety nets like
unemployment benefit, health cover and life insurance.
Many wealthy individuals from China are attempting to obtain permanent residency abroad to
provide security in a stable political climate. Although their wealth was made in China, they seek
benefits for their families outside of China. Most western countries have developed a system
whereby a foreign national can purchase residency by transferring a certain amount of assets into
the country and, typically, fulfilling certain other obligations. The US and Canada have well-
established systems that are increasing in popularity among the super wealthy from Asia (Knight
Frank, 2014, Capgemini, 2015b).
For example, to participate in the immigrant investor programme, a wealthy foreigner needs to
invest USD1 million (USD0.5 million in an economically depressed area) in an existing American
business. Although this provides a fast track to green card status, the immigrant must still pass a
background check and demonstrate that 10 jobs were either directly or indirectly created in the US
venture. This may provide a perfect solution for a lack of domestic investment and the desire of
wealthy foreigners to find stability and security in the United States. The Migration Policy Institute, a
US think tank on immigration issues, identified that this programme is predominantly used by
wealthy Chinese looking for that insurance policy. Even though 10,000 US immigrant investor visas
are available on an annual basis, only half are issued (a 2010 figure, which may have increased)
resulting in an injection of USD2.5 billion into the economy. The US may do well to step up its appeal
to foreign investors through tax incentives, business opportunities and continued social and
educational freedoms. This may serve to balance the flow of capital out of the US through
expatriation by increasing the immigration of wealthy foreigners to jump-start a domestic economy
in US (Fojtu, 2012).
The recent global Governments asset purchases have reduced yields on traditional portfolio
investments and, as a result, investors (HNWIs) have targeted tangible assets in safe haven markets.
Market cooling measures including higher purchase cost and capital taxes as well as mortgage
restrictions were aimed ostensibly at speculators but actually substantially affected non-residents.
59
However the investors and second home purchasers had become increasingly common in the cross-
border residential property transactions. It is not likely that the worlds key residential markets will
see cooling measures implemented by Regulators to decelerate the investment from non-residents
or foreign investors (Knight Frank, 2014). Given the potential easing of cooling measures in some
Asian markets in 2014, the volume of cross-border purchasing activity is likely to increase due to the
increase in wealth and the desire of HNWIs to increase their exposure to prime residential
properties (Knight Frank, 2014).
As the Chinese are getting richer, so are the numbers of new Chinese HNWIs (Capgemini, 2015b).
These new HNWIs from China are looking for different life attributes including better education,
better living conditions and political stability (Knight Frank, 2014). These wealthy individuals are
constantly looking for places perceived to have relatively low risk to park their assets. Wealthy
Chinese may find it desirable to make such a move to a western developed country motivated by
the social stigma in China against the newly rich. Due to this kind of geopolitical pressure and the
need for safety of funds and family, many wealthy individuals from China are attempting to obtain
permanent residency abroad to provide security in a stable political climate. Getting a foreign
passport is like taking out an insurance policy that allows one easy access in and out of China. For
some Chinese nationals, the dream to leave for western countries, in spite of the economic
downturn in much of the western world, is still alive and heightened by economic and social
pressures.
Although the first annual World Wealth Report was published in 1996 by Merrill Lynch and
Capgemini, there were very few empirical studies conducted on the HNWIs and their relationship
with the residential properties market and migration. Whilst this review was conducted mainly
based on the World Wealth Reports published by (Capgemini, 2015b) and (Knight Frank, 2014),
empirical studies on outward foreign direct investment from China reveals that with Chinas
sustainable high economic growth, huge current account surplus, the worlds largest foreign
reserves, a high level of domestic savings, outward FDI from China will continue as a function of
macroeconomic and natural stages of economic development (Chen et al., 2009, Cheng and Ma,
2010, Meng, 2007, Ramasamy et al., 2012, Buckley et al., 2007). Review of literature had confirmed
that limited was done on the research of these Chinese HNWIs investment preferences and pattern
in Australia. The presence of the knowledge gap on the specific drivers causing Chinas new rich to
migrate and their poorly understood investment preferences and patterns in Australia were
catalysts for the initiation of this study.
60
The World Wealth Report 2013 report from Capgemini and Royal Bank Of Canada advocated that
although there are approximately 14.6 million HNWIs in the world, their wealth exceeds USD54.6
trillion. With a different perspective, Wilson (2008) and Kharas (2010) projected a Expanding
Middle signifying a major shift in the income towards emerging economies churning more than two
billion new middle class income earners in the middle class countries. The sheer number and
magnitude of this new head count of middle class (two billion) in the world population is substantial
enough to generate interest to study their emerging influences on spending patterns, resource use,
and environmental and political pressures. The middle class spending is estimated at USD21 trillion
in 2010 and projected to grow to USD56 trillion by 2030.
The definition of Middle Class was not consistent across various world bodies and authorities. The
World Bank uses income perspectives and defines the middle class as income earners making USD2
to USD13 per day. The African Development Bank uses the range of USD2 to USD20 per day and
declared that a third of Africans had entered the middle classes (The Economist, 2011). Both of
these income approaches of classification have proven problematic for the businesses operating in
the developed world. Almost two thirds of African populations are currently earning USD2 to USD4
per day. This category of income group falls well below poverty line in developed countries. In
China, the number of people earning USD2 to USD13 per day has increased from 175 million in 1990
to 800 million in 2005 and in India 150 million to 265 million over the same period. This definition
might have imputed a rather optimistic element into the definition of middle class. It is very unlikely
that people earning USD2 to USD13 per day will have access to aspects of middle class in the
developed countries, for example good health care and education. This optimistic element is good
to estimate the number of people being lifted out of poverty but poses the problem and challenges
for related studies especially for chunky asset consumptions such as real estate investments.
This study adopted the Ernst & Young (2013) definition of middle class as people earning between
USD10 to USD100 per day. They call it the global middle class. This range is perceived more
relevant and helpful for consumption pattern studies and companies dependent on sales to those
with large disposable incomes. It is believed that middle class income earners included in this range
should have the required disposable income to purchase cars, televisions and housing and provided
a relevant basis for middle class evaluation in this study.
61
Adoption of the global middle class classification had taken away the optimism of the World Banks
middle class projection. Only a quarter of the worlds population makes USD10 to USD100 of income
and 60% of these 1.8 billion people live in the developed counties and 20% live in BRIC countries.
However, it is this richer global middle class that is forecast to grow rapidly over the next 20 years.
Numerous empirical studies had made the similar prediction on the growth of middle class including
The Economist (2011), Ernst & Young (2013), Kharas (2010) and Wilson (2008). Wilson (2008)
projected the global middle class could breach 50% of the worlds population by 2030, up from only
29% in 2008 and Kharas (2010) suggested that the global middle class could breach two thirds of the
populations by 2050. The global income distribution gaps are narrowing due to the emergence of
the Expanding Middle. The distribution of global incomes could narrow even further as other middle
income countries continue to move along with China and India. The middle income group, which are
dominated by a subset of the BRICs and N11 (China, India, Brazil, Egypt, Philippines, Indonesia, Iran,
Mexico, Vietnam) will impact global spending patterns in a significant manner (Wilson, 2008). Figure
2.7 illustrates the shift.
Figure 2.7: The Emerging Global Middle Class
100%
90%
80%
70% Others
60% EU
US
50%
Japan
40% India
China
30%
20%
10%
0%
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: OECD 2010
In 2000, Asia (excluding Japan) only accounted for 10% of global middle class spending. By 2040, this
could reach 40%, and it could continue to rise to almost 60 % in the long-term. The observation from
the OECD appears consistent with Goldman Sachs findings on middle class emergence. A significant
proportion of the new Asian middle class are also expected to be at the upper end of the income
bracket and boast impressive spending power. The steep increase in Asian demand, and the
replacement of US demand by Asian demand, is clearly seen as a trend that accelerates in the
62
coming decade. The rise of the global middle class from Asia is set to impact global consumption
patterns including global real estate market (Kharas, 2010).
Although other Emerging Markets growth will continue to be significant in the future, it is an
undeniable fact that China and India will become the power houses of the global middle class
consumerism over the next two decades. China has around 150 million people earning between
USD10 to USD100 per day and as long as the economic growth continues, there will be as many as
500 million Chinese entering into this bracket in next 2 decades (Ernst & Young, 2013). By 2030,
around one billion people in China will be upgraded to middle class or as much as 70% of Chinas
projected population.
Regardless of eventuality the global middle class forecasts, by 2030 there will be a major shift in the
distribution of wealth and the economic and political balance of power. The implication of this shift
of wealth is profound. Although Emerging Market consumption is not substantial to result in the
return of pre-2008 global growth, it may be enough to prevent a return to global recession in the
next few years provided the Developed Markets (DMs) consumption does not decline. Business
opportunities derived from the growth of global middle class shall not confine to consumer goods,
instead they will be opened to potential up surge in markets such as financial and health care
services. The upper class of the global middle class is expected to emerge as a force in tourism
across different categories and could well be contributing to the world real estate markets future
performance.
2.6.2 Residential Tourism

A model proposed by Williams and Hall (2002) depicted tourism activity as a stimulus for migration
and migration as an inducement to tourism flows. Such relationships were explored in the context of
a geographical extension of friendship, ethnic and kinship networks. Whilst such interdependencies
are not new, their scale, intensity and geographical scope had significantly increased over recent
decades.
As was noted by Williams and Hall (2002) tourist numbers may influence the number of applicants
for permanent residency. They established that the higher number of overseas visitations to
Australia, the greater the likelihood for applications of permanent residency in Australia. Additional
applications would be received from friends and relatives in the origin country who had visited
Australia and formed a favourable impression, and from those visiting for business purposes.
63
Migration to Australia within the category family reunion may stimulate Visiting Friends and
Relatives (VFR) movements which in turn lead to more applications to migrate.
In identifying the strong relationship between tourism and migration, Dwyer et al. (1993) suggested
that VFR tourism is an important element of what they called chain migration. This migration
trend is most prevalent in the case of immigration from communities where wider kinship bonds are
particularly strong. Permanent migration and tourism are linked and the link operates in both
directions. When settlers depart from a source country to establish themselves in a new location,
tourism may be stimulated through visits by friends and relatives themselves, and return by the
settlers to their country of origin. These links were analysed in the Australian context in a study
commissioned by the Bureau of Immigration and Population Research, which used immigration and
tourism data as its key information source (Dwyer et al., 1993).
Changes to living standards may influence immigration and tourism activities in both the source
country and the destination. Migration flows are influenced by fluctuating relativities in living
standards, for example, migration from continental Europe to Australia was greatly diminished once
European living standards rose to comparable or higher levels than those prevailing in Australia. The
rising living standards and the emergence of an affluent middle class in the newly industrialising
countries of North East Asia had increased the numbers able to afford to visit Australia as tourists or
take advantage of the skilled migration category for the purposes of emigration. Empirical studies
had identified the strong link between VFR traffic and migration. Whether it is domestic or
international, migration is a precondition for VFR tourism, although the connection may be indirect
when the sense of dependence is based on the migration behaviour of prior generations, (Dwyer et
al., 1993, Dwyer, 2010, King, 1994, Williams and Hall, 2002).
Dwyer (2010) had acknowledged a strong relationship between VFR travel and migration and
characterised travel for VFR purposes as a partial extension of chain migration. Boyne et al. (2002)
had also argued that migration is a prerequisite for VFR tourism. Family reunion migration to
Australia may stimulate VFR related travel, which then promotes further migration. Chain migration
had created a pool of Australian residents who may stimulate tourist visits from their relatives and
friends. Travel would seem most likely in cases where kinship bonds have been particularly strong.
Another form of the migration-tourist linkage has been described as 'transilient' migration. This type
of migration activity are prevalent in cases where professionals and managers move internationally
64
for the purposes of career development (Richmond, 2002). Their period of residence in a particular
location may constitute a short or medium term pause in their career. Most are in the category
skilled or business migrants. Typically they receive a posting to a particular country and location,
or respond to international advertisements for highly skilled personnel. The period of residence
typically occurs over a two or three year period. Transilient migration exhibits some characteristics
of an extended form of tourism with an extraordinary average length of stay. Figure 2.7 compares
proportions of holiday, Visiting Friends and Relatives (VFR) and Permanent Settlers to Australia.
Figure 2.8: Tourist Arrivals for Holiday, VFR versus Permanent Settlers to Australia
4,000,000
3,500,000
3,000,000
2,500,000
Settlers
2,000,000
Holidays
VFR
1,500,000
1,000,000
500,000
-
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: ABS 2015

Figure 2.7 demonstrates that Australia had experienced net inward migration for the entire period
under review (2003-2015) with more than 100,000 net immigrants consistently every year since
2003. As the number of permanent settlers accumulated throughout the entire review period, the
number of holiday makers and visiting relatives had simultaneously been on an upward trend since.
Visiting relatives figure exceeded 1 million since year 2004. In year 2009, a total of approximately
1.4 million tourist visited Australia were of VFR related.
A review of the literature validated that permanent migration and tourism are connected and that
the links extend in both directions. Tourism has a close relationship with migration: tourism can
generate permanent migration, and in turn, permanent migration can generate a demand for
tourism, particularly for the purpose of visiting friends and relatives (Burnley et al., 1998, Dwyer et
65
al., 1993, Dwyer, 2010, King, 1994, Huong and King, 2002, Murphy and Watson, 1994 , O'Reilly,
2007, Wilson, 1998).
Since 1990 the relevant literature had progressively diversified and has started to provide a more
holistic view of the relationships which connect tourism and diaspora (Coles and Timothy, 2002,
Nguyen and King, 2002) and the role of production and consumption (Williams and Hall, 2002).
These contributions provide invaluable contextual support for the emerging identification of tourism
migration links.
As it has increased in scale, migration to and from Australia has become increasingly complex, with
greater flows of skilled migrants as well as refugees, students and even short term employment
seekers (transilient migrants). The diversity of migrant movements, (including an increased
propensity for Australians to work overseas), has added to the complexity of the relationship
between migration and tourism, both inbound and outbound(Coles and Timothy, 2002).
The complexity extends to the various motives for short-term travel (including visiting friends and
relatives, leisure and business travel) and long-term migration. Though tourism and migration
relationships were extensively documented in the earlier report, studies did not explore some of the
complexities that have arisen over the past couple of decades. One obvious complexity has been the
addition of new sources of migration including troubled areas and countries such as the Horn of
Africa, Afghanistan and Iraq (Boyne et al., 2002).
Another complexity has been the rapid expansion of Australias international student population.
This trend was in its infancy during the early 1990s, but by 2010 Australia has emerged as a leading
exporter of education services. At the time of writing, Australia is host to over half a million
international students (589,860 international student enrolments in 2014) with a significant
proportion of these students contemplating migration at the conclusion of their studies and some
having come to Australia as students with a primary intention of attaining permanent residency.
With students enrolled in programs ranging from a few weeks to several years their contribution to
short term and longer term travel has been contested. It is however clear that this emerging trend is
a vital element of Australias relationship with emerging countries within the Asia-Pacific region and
with the populous nations of China and India in particular (Hawthorne, 2010).
66
Whilst the earlier reports clearly indicated that there is a close relationship between migration and
tourism, their comparative patterns and strengths have not been studied on a consistent basis over
time. It had been difficult to track and explain the fluctuating trends over time and to be definitive
about which determining factors were due to tourism or migration specific or involve a combination
of factors relating to inbound and outbound tourism activities. One of the factors mentioned
contributing to tourism was the reducing cost of travelling. These reduced costs may apply
generally, whereas others may be more specific to countries where certain migrants have
originated.
The earlier empirical studies had highlighted the different experiences and behaviours of migrant
groups who had settled during different periods. In this analysis, it is suggested that we need to take
into account of various new emerging migrant sources and the maturing of others. It appears likely
that Asians, who have formed an increasing share of recent migrant intakes, are in a better position
to stimulate more frequent travel activity because of their closer proximity to the country of origin.
To date there has been little empirical investigation of the relationship between current migration
and tourism in the case of earlier (e.g. from continental Europe) and more recent migrants.
Dwyer (1993) noticed that there appeared to be a link between outbound non VFR tourism and
migration. In addition, there appears to be a strong link between inbound non VFR tourism the
link appears to be almost as strong as between migration and VFR tourism. The existence of a
migrant culture might induce some non VFR travellers to explore countries that they are familiar
with indirectly. Thus Australians may be interested in visiting Italy even though they have no
connections via migration (and they might be less interested in visiting Spain, which is a country that
has limited links to Australia via migration).
Tourism may also generate migration flows. Most obviously through the demand generated for
labour which, if it cannot be met locally, will stimulate labour migration (Monk and Alexander,
1986). Such labour mobility may be differentiated by nationality, gender, ethnicity and skills,
depending on the particular features of the tourism industry, and the local labour market (King et
al., 1995). In addition, tourism may contribute to defining the search spaces of migrants (Brown and
Moore, 1970), whether these are labour, life style or retirement migrants (Snepenger et al., 1995).
The links between tourism and migration are set to become more complicated in the future as
changes occur in the nature of work, leisure and family organization. Space is being used in new
and more imaginative ways for both production and consumption, and this often involves trans-
67
border movements and transactions which exploit place differences (Williams and Hall, 2000). One
of the important consequences of the analysis of the relationship between tourism and migration is
that it provides an opportunity for tourism researchers to relate to and contribute to the work of
other social scientists.
Whilst studies conducted thus far on the relationship between tourism and migrations activities in
Australia had been based on the perspective of VFR and Non VFR, this study intend to make specific
reference to the residential tourism trend in Europe. Studies revealed that North Europeans had
been migrating to Spain coastal towns in an increasing number since 1980s. This movement of
migrations in Europe has provided a new perspective of migrations due to tourism related activities.
Similar to Australia, Spain had been a country of net emigration since 1960s.
Residential tourism is a term being used increasingly by estate agents, newspaper, academics and
council officials in Spain (Aledo and Mazon, 2004, Casado-Diaz et al., 2004). It specifically refers to
property ownership and short-term residence of North-Europeans in tourist areas, residence that
falls short of full migrations.
Although it had always been difficult to disentangle migration and tourism in Europe, O'Reilly (2007)
practical observations depicted direct resemblance of tourism-migrations pattern in Australia.
Residential tourists definition specifically distinguishes them as an affluent group that enables them
to turn tourism as a way of life and to construct fluid, leisure lifestyles between places. They are also
being characterised as tourist who had ostensibly try to settle, they still remain in some ways
outside or above the community they have moved to.
Some of the identified drivers that result in these residential tourists into Spain as noted by O'Reilly
(2007) were globalisations, increased interconnectedness and the increased sense of the world as a
single place; the development of mass tourism, in which more people visit more places than ever
before, and now the travel, fluidity, flow and flux that arguably characterise modern life (Benson
and O'Reilly, 2009, Urry and Larsen, 2011); the spread of mass communications, and time-space
compression, rising living standards and unprecedented rises in property values in some parts of the
world, especially relative to other parts; flexibility in labour markets, the ability to live and work in
different places, and with these, increased leisure time in affluent societies, extended holidays, early
retirement, and flexible working lives; and finally migration chains, in which, through the
construction of networks, migration movements, once begun, become self-sustaining of social
processes (Castles et al., 2005).
68
The residential tourist, being a more affluent group in Europe spent substantial amount of time in
the host country throughout the year mainly for the purpose of a holiday. Many of them live on
urbanizations (similar to Australia), concentrated developments of second homes and they share
social spaces, newspapers, magazines, shops and even workplaces with the locals. These residential
tourists were link to the residential property market of the host country in the manner that they
invested in residential properties to obtain a higher return in terms of property prices
improvement(Rodrguez and Bustillo, 2010).
In 2005, an international architect Jan Gehl pronounced that Melbourne was a success story in
terms of liveability. Melbourne is a liveable, lively and vibrant city. Important changes had altered
the nature of the central city and its daily life from almost exclusively a place of work, to a place of
work, recreation and residence in almost equal measures (Gehl, 2004). Inner Melbourne had
attracted new residential property development due to its amenities. The amenities had been
enhanced by massive State Government and City of Melbourne (COM) investment in infranstructure
including CityLink, Southern Cross Station, public places (Federation Square), parks (Birrarung Marr)
and Melbourne city laneways. These investments were intended to enhance Melbournes prospects
of becoming a centre of knowledge intensive industries by enhancing the citys liveability. COM
vision is to transform the Central Business Districts (CBD) and surrounds into an inviting mix for
residence, work and entertainment (Birrell, 2013). According to Birrell (2013), the residential
property boom in Melbourne was one of the bright spots in Melbourne economy. The State
Government is keen to maintain the growth in property segment in the midst of a substantial
slowdown in other economic sectors.
In 2015, Melbourne was again named the most liveable city for the fifth consecutive year by The
Economists (Lucas, 2015). Melbourne was ranked the worlds most liveable city, Adelaide fifth,
Sydney seventh, Perth eighth and Brisbane 18th. Australian cities were reported to be a relative
picture of stability. 20% of the cities surveyed by The Economists Intelligence Unit experienced
declines in liveability over the past years. The rankings were the result of scores for lifestyle
challenges in 140 cities worldwide. The report is used by multinational companies to decide on
relative pay for employees when they move cities for work. Melbourne Lord Mayor, Robert Doyle
proclaimed that the latest ranking proved a very important sale point for Melbourne in a very
competitive tourism and education market.
69
The manner of which these residential tourists were defined allowed us to capture one of the
main aspects of this research, i.e. to investigate the cross border property investments, led by the
Mainland China Chinese, who had displayed similar residential tourist characteristics and invested
in the residential properties in Australia major cities of Sydney and Melbourne. It is envisaged that
this investigation will assist to address the market observations of the existence of some unknown
and unusual factors contributing to the surge in housing demand in Australia in relation to foreign
investors (CommonwealthBank, 2014). This study will also help to address the question of a
surprisingly strong link between inbound non VFR tourism in fact, the link appears to be almost as
strong as between migration and VFR tourism (O'Reilly, 2007).
2.6.3 Educations and Migration

According to the Australian Department of Education and Training (DEAT) in year 2014 overseas
students accounted for 25.3% of the total number of students registered in Australian higher
education. An approximate 1.4 million domestic and international students enrolled at higher
education institutions in 2014, represents an increase of 4.5% from 2013. There were approximately
1 million domestic students in 2014 (74.7 per cent of all students) compared to overseas student
enrolments increased by 5.8% over the same period to 347,560. Australia has arguably become one
of the most successful exporters of higher education. From 2014 to 2015, the number of Chinese
nationals studying at Australian higher and vocational education institutions had increased from
150,893 to 170,212 students (DEAT, 2015). Table 2.4 details the top tertiary level student
destinations in 2013:
Table 2.3: World Top International Student Destination 2013

Host Country International Global
Tertiary Student Share
Enrolment %
United States 842,384 19%

United Kingdom 428,724 10%
Australia 266,048 6%
France 235,123 5%
Russian Federation 213,347 5%
Germany 210,542 5%
Total 50%
Source: UNESCO 2015
Table 2.4 illustrates the ranking of the world leading education providers. In 2013 six destination
countries hosted nearly half of all total international students in the survey. Australia was ranked
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third, after United States and United Kingdom, with 266,048 international tertiary level student
enrolments in year 2013. It is interesting to note that Australia was on the top spot when comparing
the proportion of international students versus the domestic students. This implies that Australian
colleges had the highest numbers of international students when compared to the rest of the world.
Empirical studies revealed that an increasingly significant element of visa policies concerns
opportunities to work in the host country during and after the study period. Combined with the
ageing populations of many developed countries, increased competition in the global recruitment
market has contributed to student and graduate visa schemes becoming a central part of the
recruitment efforts of many major study destinations. Various developments had shown that
international student and graduate visa schemes are increasingly used as integral parts of
recruitment strategies and are receiving more attention in accordance with their perceived
importance and strategic value (Verbik and Lasanowski, 2007).
Between 1996 and 2000, 26% of Australian tertiary sector funding was removed in real terms
following the election of a conservative government. Compensating for revenue reduction,
universities accelerated their transition from academy to global business, in part through
increased recruitment of international students (Marginson and Considine, 2000). In 2002, 150,000
international students were enrolled in Australian courses - the majority being ethnic Chinese from
Commonwealth-Asian countries, with substantial numbers attracted to two-step migration.
By the time of Australias 2006 skilled migration review, former international students had a 99%
chance of being selected, unless failing health or character checks surfaced. The scope for skilled
migrations had also established new international student markets (primarily China and India), while
transforming the sector and discipline of demand. Migration had also become critical to Australias
export education industry, with students by 2008 generating AUD26.7 billion per year (the third
largest export), in a context where minimal growth was now evident from Australias traditional
Commonwealth-Asian source countries.
Contrary to the US who tightened international student and immigration policies subsequent to the
9/11 terrorist attack, Australia is perhaps the best example of a country using visa and immigration
policies to become more attractive to international students. In addition to its points system
encouraging skilled immigration, Australian regulations allow all international students completing
an Australian degree to remain in the country for 18 months upon graduating. In the past,
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international students were exempt from work experience requirements when applying for general
skilled migration, but under legislation, introduced on 1 September 2007, authorities now provide
temporary visa mechanisms to enable applicants to gain such experience. The changes had
reportedly been made in an attempt to strengthen links between study, work experience and
employment and to ensure skilled migrants had the skills for which Australia employers are looking
(Citizenship, 2007).
Hawthorne (2010) exemplified a transition to what was termed two-step migration of which all
former international students were allowed to remain in the country after completing an Australian
degree under the General Skilled Migration Programme (GSM). Australia had developed
unprecedented reliance on these skilled migrants, a process intensified by a period of sustained
economic boom. International students who completed their higher education studies had since
became a major source of skilled migrants in Australia.
By 2010 Australia had emerged as a leading exporter of education services. Australia was host to
over half a million international students, with a significant proportion of these students
contemplating migration at the conclusion of their studies and some having come to Australia as
students with a primary intention of attaining permanent residency. With students enrolled in
programs ranging from a few weeks to several years, their contribution to short term and longer
term travel has been apparent. It is clear that this emerging trend is a vital element of Australias
relationship with emerging countries within the Asia-Pacific region and with the populous nations of
China and India in particular (Dwyer, 2010).
A review of empirical studies uncovered that as immigration activities increased in scale, migration
to and from Australia had become increasingly complex. There were evidences that migration had
geared towards greater diversity with greater flows of skilled migrants as well as refugees, students
and even short term employment seekers (transilient migrants). The new emerging trend of private
wealth from Asia Pacific had further introduced a new dimension to this complexity. These diversity
of migrant movements, specific reference is made to the increased tendency of graduates in
Australia took up permanent residency status in Australia, had added to the complexity in the
studies of various attributes contributing towards the inward migration in Australia. The unique
characteristics of private wealth laying great emphasis on lifestyle, preservation of wealth and
education for their next generations had introduced a new relationship between education and
their investment activities. Along with their intension of wealth preservations, many HNWIs and/or
72
the global middle class had sent their children overseas for further education with the ultimate
intension of migrating. It is believed that this distinct requirement had resulted in many HNWIs
and/or global middle class investing in the residential property markets either for owner occupying
or wealth preservation purposes. Although much was deliberated on the relationship between
education and migration activities, there was no specific study conducted on how education in
Australia is influencing the residential properties performance in the context of private wealth
investment activities in Australia. This study intends to investigate this new relationship.
2.7 Summary & Implications
Review of the relevant literature has revealed that substantive economic theories and empirical
evidence underpin the conjectured relationship between FREI and the host countrys real estate
market performance. The review established the emergence of real estate as an important asset
class of international investments. Australian real estate market is one of the asset classes that
overseas investors are interested in given a favourable set of governing economic policies that are
expected to maximize investors wealth in the long run. In this aspect, the review of literature
confirms the established relationship connecting migrations, population, education, tourism and
property market performance in Australia.
Despite there being international agreement, it appears that this conjectured relationship was not
adequately tested in the recent Australian residential property market and from the literature, there
appeared to be a number of gaps (refer to Figure 2.5.1) warrant further exploration.
Table 2.4: Literature Gap Summary
Gap 1 Reviews to date show that there is few empirical studies revealing the
overseas investments in Australian residential properties for the
purpose other than owner occupying.
Gap 2 Reviews to date show that there was no empirical evidence on the
rationale for overseas investors defying the normal risk averse
investment strategies and allocating money into Australian real estate
markets
Gap 3 Reviews to date show that there were no empirical studies on the
impacts derived from the various new migration trends in terms of
residential tourist and subscriber of education stemming from the
emergence of new Chinese private wealth on residential properties in
73
Melbourne and Sydney

Gap 4 There is apparent limited information on both quality data and
literature pertaining to foreign real estate investment in residential
property market in Australias metropolitan areas.
It is these gaps that have formed the foundation of the research questions for this study, which are:
1. What were the rationales for offshore investors defying the normal risk averse investment
strategies and allocating money into Australian residential property market?
2. What are the determinants driving offshore investors to buy into the residential property
market in Australian major cities like Melbourne beside the conventional financial and
economic factors?
3. Do the non-traditional determinants identified as Residential Tourism and Education play a
part in attracting offshore investments into Australian residential property market and if
yes, were they significant determinants?
The conceptual framework that will guide the study has been developed from the literature review.
It will focus on the relationship between Melbournes residential property market and the FREI.
Four objectives have been developed from both the research questions and the identified gaps.
These research objectives are documented below:
i. To identify the major determinants, both historical and emerging, in the Australian
residential property market for the past decade. How had the offshore property
investment patterns shaped the overall residential property market in Australia in the past
and the present, making specific reference to Melbourne?
ii. To explore the fundamentals of foreign cross-border real estate investment and the
related influential government policies onshore and offshore. Who are these foreign
Investors? Are they mainly the migrants into Australia who are buying properties for own
residential purposes or are they foreign investors acquiring properties as part of their
investment portfolio? What drove them to acquire properties overseas?
iii. To identify and design assessment models that facilitates the research execution and
analysis. It is envisaged that a new research model allowing a more comprehensive review
and tackling the complexity of how both overseas and local Government policies mpacting
the host countrys real estate market is crucial.
74
iv. To reveal the dynamics of Overseas Real Estate Investments in Australia and the
significance of these offshore investments shaping the local housing market. Assessing the
past and present, what are the different characteristics between these Offshore Investors as
against the migrants when it comes to the aspect of buying residential properties in
Australia? Do they buy based on a single location or do they hold a portfolio of properties /
instruments on a regional basis?
v. To reveal the key government policies, both onshore and offshore, that had driven foreign
investors into Australian residential property market. Literature revealed that government
policies of foreign nations were correspondingly instrumental in the decision making
process of foreign investors. Study on foreign investments in the host country would have
been more comprehensive if the research on key government policies of the foreign nation
that drove its citizens pouring money overseas is incorporated.
75
Chapter Three:
Research Design and Methodology
3.1. Introduction
The main objective of this chapter is to design appropriate research methodologies to allow for an
effective assessment of the association and strength that various dynamics, drivers and new
determinants have on Melbourne metropolitan house prices and two Melbourne selected suburbs.
This explanatory study intends to utilise both quantitative and qualitative research methodologies
and should be therefore considered mixed in research conducts (Amaratunga et al., 2002). The
mixed methodologies shall form the study platform for this research assessing the strength of
various long term determinants on house prices in Melbourne.
Based on the Pull and Push model established in this paper, this explanatory study will first
evaluate the correlations and significance of 15 leading Australian economic indicators specifically
from the respective Space, Property and Capital markets. Both historical secondary data and data
collected in the qualitative research phase will be utilised to assess their respective impacts and
influence over the Melbourne housing performance. Along with the evaluation of traditional
determinants, two non-traditional determinants from the Space Market namely Education and
Residential Tourism shall be introduced with detailed analysis on their impacts on Melbourne house
prices utilising the model and planned methodologies.
The explanatory study and analysis was expanded to assess the correlations between various
Chinese leading economic indicators and the performance of the house prices in the selected
Melbourne residential property markets. The objective of this investigation is to establish if overseas
economic indicators, especially from a significant offshore investor in Australia like China, had
emerged as influencing determinants on the Australian residential market conditions.
This Chapter has 8 sections. Subsequent to Section 3.1 introduction, Section 3.2 outlines the
research design, research approaches and the modelling design. Section 3.3 presents the detailed
methodologies based upon in this research to ensure consistency and adequate coverage/analysis
of important traditional and non-traditional factors. Section 3.4 depicts the data collection strategies
and 3.5 details the associated sampling techniques. Section 3.6 details the quantitative research
approaches utilised to assess the determinants of house prices in Melbourne whilst Section 3.7
presents the qualitative research steps. Section 3.8 summarizes the entire research design and
approaches.
76
3.2. Research Design

3.2.1. Research Approaches
The findings from the Introduction (Chapter One) and Literature Review (Chapter Two) have shown
that there is a need to reassess the complex Australian residential property market with regard to
existing and emerging determinants that had potentially influenced or directly impacted the
performance of the Australian residential property market. The normal investment theory and law
of demand and supply was perceived inadequate to confirm the reasons of offshore investors
preference in Australian residential properties over other parts of the world. The existence of some
unknown and emerging factors had contributed to the surge in housing demand in Australia with
specific reference made to the foreign investors. Limited dated information was quoted as a
hindrance when the research was conducted. A more extensive research into these unknown factors
causing the surge of housing demand in Australia cities has become important to the Australian
property industry (Commonwealth Bank, 2014).
The nature of this research has necessitated a study confronting the emerging factors of market
determinants on Australian residential property market. It is important to examine this researchs
objective with the corresponding research design plans and undertakings to ensure effectiveness of
the study. Table 3.1 depicts the research objectives and the associated research approaches:
Table 3.1 Research Objectives and Approaches
Research Objectives Approaches

I To identify the major determinants, both historical and Stage One:
emerging, in the Australian residential property market Introduction
Literature Review
II To explore the fundamentals of foreign cross-border real
estate investment and the related influential government
policies, both onshore and offshore
To identify and design assessment models that facilitates Stage Two:
the research execution and analysis Modelling
III To reveal the dynamics of Overseas Real Estate Stage Three:

Investments in Australia and the significance of these Quantitative
offshore investments shaping the local housing market Analysis of
Secondary Data
To validate and provide insights on the relationship and Stage Four:
validity the new market determinants have on Australian Qualitative
residential property markets Analysis of
77
IV To reveal the key government policies, both onshore and Structured

offshore, that had driven foreign investors into Australian Interviews Data
V Research outcomes discussion and conclusion Stage Five:

Discussion and
Implementation
Table 3.1 exhibited the key stages of this research to be executed to attain the 5 defined research
objectives. Various new developments in Australian residential property market, the fundamentals
of offshore investments and the traditional factors that resulted in overseas investment in the host
country property market were identified in Stage One, Introduction and Literature Review. In Stage
two, property market models were reviewed in an effort to develop a research model to facilitate an
effective research conduct. Stage Three involved using Pearson Correlation Coefficient and Stepwise
Regression Time Series methodologies to analyse secondary data collected. Qualitative (text) data
was collected and analysed in Stage Four of the research to help explain, or elaborate on, the
quantitative results obtained in the third phase (Creswell and Clark, 2007). The final research
outcomes are tabulated and implemented at Stage 5. Figure 3.1 presents a step by step
diagrammatic perspective of a research design model for this study:
Figure 3.1: Research Design Model
Define Research Phase

Background study, extended literature review
Stage1
Modelling
Design research model to facilitate research coverage and execution
Stage 2
Qantitativce Research Phase

Utilises secondary data to assess the association between the independent Variables (House Prices) and Dependent
Stage 3 Variables (3 markets economic indicators)
Qualitative Research Phase

In-depth analysis will be conducted through Semi-structured Interviews. This qualitative analysis aims to illuminate
Stage 4 reasons to explain and understand the phenominon resulting from the quantitative data analysis
Discussion and Implementation

To analyse and discuss the researh results
Stage 5
78
Figure 3.1 illustrates the five research stages for the attainment of the five research objectives and
the research approaches that guides the entire research execution. The strategy behind the research
model was to first perform a background study of the subject matter through the literature review
to identify the foreign investment fundamentals and theories behind foreign investments in
Australian residential property market. A research model was established in Stage Two, based on
the findings from Stage One, to allow for guided parameters and systematic execution plans for the
entire research exercise. New and unknown determinants that resulted in the surge in foreign
investments in Australian residential property markets shall be analysed thoroughly using mixed-
method research analysis in Stage Three and Four.
3.2.2. The Model
While quantitative correlation analysis can determine the relationship of individual economic
variables to the house prices, it tends to overlook that most factors interact simultaneously with
varying intensity and at different time periods to the house prices (Higgins, 2000). As depicted in
Chapter Two section 2.3.2 instead of merely based upon space (demand) and property markets
(supply) in both short and long run, this study intends to utilise the Higgins (2010) research model,
adapted from the Archer and Ling (1997) model, by separating specific property investment
(Property Market) and funding risk components (Space Market) from the general capital market
(Capital Market) in the assessment of historial and emerging determinants. Review of the literature
underlined the importance of combining these influences into the model to address the
fundamental interactions and relationships between all the determinants. Foreseeing the potential
risk in the research with complicated multiple economic indicators and emerging determinants
blended together to form a forecasting model, this research intends to rely extensively on a
comprehesive research model to provide a systematic research platform. The Higgins (2010) model
is used as the first platform to build economic models which will demonstrate the best inter-
relationship of separate economic variables to house prices and on the selected relevant lagged
economic indicators of acceptable significance. Once the foundation for local determinant research
is established, offshore elements and influnces will be systematically built into the research
modelling.
Moshirian and Pham (2000) exploited determinants of US investments in real estate abroad based
on FDI model, by comparing FDI in real estate as a subset of FDI in general. They included specific
explanatory variables such as financial wealth, return from the US stock market, US financial
liabilities, bilateral trade and economic growth. They had validated the FDI platform for the
exemplifications on other relevant explanatory variables. In his studies, all the specific explanatory
79
variables listed above were the determinants of US investments in real estate abroad or foreign real
estate investments overseas. As Moshirian and Pham (1999) noted, the majority of research found
that diversification by location would more likely produce benefits in the markets that were not
perfectly correlated, although there was a degree of variability depending upon the countries being
examined.
Following the review on various studies conducted specifically on FDI investments abroad, it is
conclusive that equal importance, if not more, should be placed on the investigations on the source
of FDI in determining the factors affecting FDI in the host country. Studies by Cushman (1987), and
Froot et al. (1991) have identified exchange rates as the main determinant for FDI abroad. Nigh
(1986) advocated that the size of the share market in the host country is the most significant factor
for FDI abroad. Frey et al. (1985) concluded that the balance of payment was the most significant
determinant of FDI abroad.
Furthermore, studies by Culem (1988) advocated that the host market size, the market growth rate,
unit labour cost, trade flows and economies of scale are the determinants of FDI abroad. With
regard to studies on FDI in the banking industry abroad, Goldberg and Johnson (1990) suggested
that the cost of capital, market size, exchange rate, economic growth and trade were the major
determinants of FDI in banking.
The review of literature resulted in a new research model and has been proposed in this study to
facilitate a systematic research conduct. It is envisaged that studies on FDI in the host country will
be more comprehensive if research efforts are simultaneously channelled to assess the impact on
investors decision making of the source countries economic and financial policies.
Based on the essential fundamentals of Higgins (2010) model, Figure 3.2.4 illustrates the proposed
Push & Pull model accomodating an additional assessment approach through incorporating source
countrys factors and their respective impacts on Space and Financial markets:
80
Figure 3.2: Property Market Structure: The Push & Pull Model
Push
Factors
Pull
Factors
Source: Author
Figure 3.2 illustrates an added component of Offshore Government Policies (of the country from
which the offshore investors originated) and how those policies impacts and influences over the
Space and Capital markets of the host country have been incorporated in the Push & Pull model. It
is belived that the resultant economic outcomes of the offshore Government policies will affect
meaningfully the foreign investment outflow from the source country and emerge as significant
influences over the Space and Capital market of the host country. Property Market supply
conditions are very much associated with the policy implementation of local Government agencies
or in other words, not necessarily correlated to offshore government policies. As a result the
offshore Government policies assessment will be centred mostly at Space and Capital market
determinants. The Push & Pull model provides an additional platform of assessment for various
determinants on foreign investments into the host country for this study.
In this study, Chinas leading economic indicators that could have influenced Chinese offshore real
estate investors choices and decision making will be explored. It is envisaged that this new model
can facilitate an organised and systematic approach to investigate potential drivers of offshore
property investments in host countries. It would also provide a practical platform for the review on
how foreign investors were impacting the residential property market performance in Australia.
3.3. Methodologies
Only by the use of appropriate research methodologies can the body of knowledge for the Built
Environment (BE) be established and advanced with confidence (Amaratunga et al., 2002). There
had been strong suggestions within the research community that both quantitative and qualitative
81
research are best thought of as complementary and should therefore be considered mixed in
research conducts.
Teddlie and Tashakkori (2009) publication of the Handbook of Mixed Methods in the Social &
Behavioural Sciences, tabulated approximately 40 types of mixed method designs spanning from the
health to education research fields. Creswell and Clark (2007) consolidated known mixed method
designs into four major typologies: triangulation, embedded, explanatory, and exploratory designs.
Table 3.2 provides a brief summary of the four mixed methods designs.
Table 3.2: Mixed Methods Typologies: Design Type, Variants and Notations
Design Type Variants Notation
Triangulation Convergence QUAN + QUAL
Embedded Experimental/Correlational QUAN(qual)

or
QUAL(quan)
Explanatory Follow-up explanaton QUAN --> qual
Exploratory Instrument development QUAL --> quan

Taxonomy development
Source: Creswell and Clark 2007; Teddlie & Tashakkori 2009
Table 3.2 summarises that in mixed methods research, qualitative and quantitative data may be
equally weighted (QUAL+QUAN), or one may be emphasised over another (example QUAL quan).
The + symbol denotes both quantitative and qualitative data are collected at the same time. The
symbol indicates a sequential form of data collection. The capitalised notation (for example,
QUAN) denotes a weight or priority to one method over another.
Triangulation design allows the researcher to simultaneously collect both quantitative and
qualitative data, merge that data, and use the results to understand a research problem. The design
takes the weakness of quantitative research (generalisation), and complements it with the strengths
of qualitative research (emerging design). Embedded design is where the research has primarily
focused on one type of data, supported by the other type of data. Put simply, researchers insert a
qualitative component within a quantitative design. Edmonds and Kennedy (2012) explained that
with mixed methods designs, the timing of the strand is relevant; that is, whether it is implemented
concurrently, sequentially, nested (embedded), or multilayered. Therefore, each of the four mixed
82
methods designs identified in Table 3.2 has several multi-strands (or sub-designs); for example,
parallel mixed designs, sequential mixed designs, conversion mixed designs, multilevel mixed
designs, and fully integrated mixed designs. The type of multi-strand design used in this research
study is sequential mixed design. Ivankova et al. (2006) explained that sequential studies occur in
chronological order, with one strand emerging from, or following, the other.
Before suggesting an appropriate research approach in this study, it is useful to explore and
understand the fundamentals of these research methodologies and to put them into perspective.
Table 3.3 below summarises the fundamentals of these research methodologies:
Table 3.3: Fundamentals of Various Mixed Methods
Fundamentals
Triangulation Researcher simultaneously collects both quantitative and qualitative

data, merges those data, and uses the results to understand a research
Design
problem.
The design complements the weakness of quantitative research
(generalisation), with strengths of qualitative research (emerging
design).
Embedded design Researcher incorporates a qualitative research component within a
quantitative design.
Researcher focuses on one type of data (QUAN) and seeks to gather
support from the other type of data (QUAL).
Explanatory Researcher conducts the mixed method in two distinct phases
design Research uses qualitative data to help explain and support the initial
quantitative results.
Exploratory Researcher conducts the mixed method in two distinct phases
design As opposed to Explanatory design, the qualitative results are obtained
first, followed by quantitative data that informs the qualitative data
Source: Amaratunga, 2002; Creswell, 2007; Teddlie, 2009
The strengths and weaknesses of this mixed-methods design had been widely discussed in the
literature (Creswell et al., 1996, Creswell and Clark, 2007, Greene, 2008, Green and Caracelli, 1997,
Moghaddam et al., 2003). Its advantages include straightforwardness and opportunities for the
exploration of the quantitative results in more detail. This design can be especially useful when
unexpected results arise from a quantitative study (Morse, 1991). The limitations of this design are
the time required and feasibility of resources to collect and analyse both types of data.
The mixed-methods sequential explanatory design consists of two distinct phases: quantitative
followed by qualitative (Creswell et al., 2003). The explanatory mixed methods design features the
merit of the qualitative data which will help explain initial quantitative results and provide an in-
83
depth perspective of research. The exploratory design is similar to the explanatory design in that it is
also a two-phase method in which qualitative results are obtained first, followed by quantitative
data that informs the qualitative data (Creswell and Clark, 2007, Teddlie and Tashakkori, 2009).
Figure 3.3 illustrates the sequential explanatory design framework:
Figure 3.3: QUAN QUAL Sequential Explanatory Research Design
Quantitative Data Quantitative Data

Collection Analysis
Connecting
Quantitative And
Qualitative Phases
Qualitative Data Qualitative Data

Analysis Collection
Integration of the
Quantitative And
Qualitative Results
Adpated: Ivankova 2006
In this design, a researcher first collects and analyses the quantitative (numeric) data. The
qualitative (text) data are collected and analysed second in the sequence and help explain, or
elaborate, the quantitative results obtained in the first phase.
Given the nature of investigation in this research the residential property markets modelling phase
(quantitative) followed by semi-structured interview (qualitative) - this research was classified
within the sequential explanatory mixed methods design. This study prioritised the QUAL over
QUAN phase, not in the manner of the research conduct but in terms of the research results
interpretation. The second qualitative phase builds on the first quantitative phase and the two
phases are connected in the intermediate stage in the study (Ivankova, 2006).
The rationale for this approach is that the quantitative data and their subsequent analysis provide a
general understanding of the research problem. The qualitative data and their analysis refine and
explain those statistical results by exploring participants views in more depth (Creswell et al., 2003,
84
Rossman and Wilson, 1985, Teddlie and Tashakkori, 2009). The reason for collecting the
quantitative data first is to identify the respective leading economic indicators and new
determinants that impacted the Australian residential property market. Once the significant
correlated economic indicators and determinants were identified, they formed the pillars for the
subsequent qualitative investigation to help explain, or elaborate on, the quantitative results
obtained in the first phase.
Various leading economic indicators including both the traditional factors (for example: Currency
Exchange rate) and the non-traditional indicators (for example: Tourist Arrivals Data) were collected
and analysed in the first phase of research. These QUAN data were analysed to assess the
relationship between residential property prices and all the selected indicators. The finding of this
QUAN research phase provides the much needed rationales and direction for the subsequent
selections of participants (QUAL) and structured interviews questionnaires. The second phase
qualitative data analysis assists in identifying the theory on overseas investors property asset
allocation strategies and decision-making processes. Figure 3.4 outlines the proposed explanatory
research design framework that will be utilized in the investigation of Australian residential property
markets:
Figure 3.4: Proposed Research Approach: Explanatory Design Participant Selection Model
Economic Indicators Data Collection

Economic Indicators Data Analysis
QUAN Residential Property Market Model Formulations
Participant's Selections
Semi-structured Interview Data Collection
QUAL Residential Property Markets Determinants Analysis
QUAN ---> QUAL

Interpretation
Source: Author
As shown in Figure 3.4, this study will place emphasis on the QUAL results over the QUAN results
interpretation. Having established the type of mixed method research design and due to the size
and characteristics of the Australian residential property market, local house prices driven by
specific determinants shall be determined.
85
3.4. Data Collections Strategy
Mixed methods research methodology addresses both the quantitative and qualitative research
(Creswell and Clark, 2007, Ivankova, 2006). Quantitiative researchers use specific analysis
techniques to address specific research questions. The research questions in the quantitative study
are directional because they state either a relationship between two or more independent variables
with the dependant variables or a comparison between the two variable groups. Qualitative
research tends to be broad and allows the study to take shape as data is collected. Qualitative
research normally incorporates open-ended questions that are designed to elicit answers to a wide
range of possibilites including the how, what, who and where of a particular situation.
Qualitative research has the charateristic of being non-restrictive in terms of where the research or
information might lead eventually. Figure 3.5 demonstrates the typical Mixed Methods data
collection strategies and the related analysis and interpretaion framework.
Figure 3.5: Mixed Methods Data Collection Strategies
Quantitative Mixed Methods Qualitative
Pre-determined method Both pre-determined Emerging method

Instrument based and emerging method Open-ended questions
questions Both open-ended and Interview data,
Performance data, closed-ended questions observation data,
attitude data, Multiple data forms document data, audio-
observational data and deriving all possibilities visual data
census data Statistical and text Text and image analysis
Statistical analysis analysis Themes, patterns and
Statistical interpretation Across database interpretations
interpretations
Source: Creswell 2009
Figure 3.5 illustrates the different research approaches of quantititive, qualitive and mixed methods
reseach methodologies in terms of both data collections and analysis. Quantitative research designs
can accommodate a single or multiple combination of descriptive, correlational, quasi-experimental
and experimental. Qualitative designs can include a combination of biography, ethnography, oral
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history, phenomenological, case study and grounded theory. The choice of the data collection and
eventually interpretation strategy is a foundation of research, past and present events with the
desired degree of control events embeded. Data collection strategies are distinctly different relating
to open-ended versus closed-ended responses. However some data collected from surveys and
interviews might be categorized into either quantitative or qualitative. The researcher is to rely on
the design of response options made available in the questionaires to determine if they are open-
ended or closed-ended (Creswell and Clark, 2007). Table 3.4 depictes Yin (2013) categorization of
research data collection strategies and their characteristics:
Table 3.4 Research Data Collection Strategies and Characteristics
Source: Yin (2009)
Table 3.4 illustrates the various categories of research data collection stategies with the related
questionaire designs and the degree of control over the events required for each of the strategies.
The research questions design in the explanatory methods need archival analysis and survey to
derive the research outcomes. This method does not require control over the behavioural events
but there will be a greater focus on contemporary events. Based on the intended mixed method
explanatory design for this reseach, the data collection strategy will be focusing on how, why,
who and where questions using a survey and history strategy. The quantitative phase of this study
will strive to solicit background theories of how and what factors drive overseas investors into
Australias residential property market. With these research results, the qualitative phase shall
support and validate the determinants of overseas investments in Australias residential property
market. In a sequential phase research methodology, the second phase questions will be developed
subsequent to the first phases research outcomes and elaborate on the results (Creswell and Clark,
2007, Ivankova, 2006).
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3.5. Sampling Techniques
Inferential Statistics deals with methods of estimating population parameters using sample data. A
population is the larger group from which a researcher infers to form results using a smaller data set
called the sample data. In this thesis, the population is the Australian residential property market
and the sample is house prices in Melbourne Metropolitan and two selected suburbs.
A researchers confidence in their ability to infer whats happening in the population comes down to
the quality of the sample and quality of the data collected. A sample is a smaller subset of a
population. If the sample is chosen appropriately, it can provide an accurate estimate of the
population. Cost, time and practical constraints were cited as reasons why measuring the population
was practically impossible. For example, The Australian Bureau of Statistics (ABS) conducts the
Australian census that measures the entire resident population. It cost in excess of AUD400 million
in 2011 (ABS, 2011).
Quantitative data collection strategies often involve random sampling. Random sampling allows
every element or person in a population has an equal chance of being selected. It is believed that
this probability based method will maximise the chances of gathering a representative sample (Lohr,
2009). On the contrary, qualitative data collection strategies mostly involve purposeful sampling.
Elements or persons selected in the research will be based on their experience of the central event.
In a mixed methods design, both purposive (qualitative research) and probability (quantitative
research) sampling techniques are involved in the manner of observations
(structured/unstructured), interviews (open-ended/closed-ended), focus group and questionnaires
(Teddlie and Tashakkori, 2009).
According to Teddlie and Yu (2007) and Bryman (2006), the mixed methods sampling can be
categorised according to Table 3.5:
Table 3.5: Mixed Methods Sampling Methods
Sampling Methods
Basic Mixed The researcher first divides the group of interest
Method Sampling into strata (e.g., above average, average, below average
students) and then selects a small number of cases to study
intensively within each strata based on purposive sampling
techniques; a samples within sample technique
Sequential Sampling from the first phase informs the second phase or the
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Sampling methodology and results from the first strand inform the
methodology employed in the second strand. Purposive
sampling followed by probability sampling
Concurrent Mixed Concurrent MM designs allow researchers to triangulate the
Method results from the separate QUAN and QUAL components of their
research, thereby allowing them to confirm,
cross-validate, or corroborate findings within a single study.
Both purposive and probability sampling procedures are
executed simultaneously
Multi-level Different units of analysis are nested within one another and
sampling sampling occurs in two or more levels of units of analysis.
Probability and purposive sampling techniques are used at
different levels
Within the scope of this research, sequential sampling mixed method is applied in which probability
sampling is followed by purposive sampling technique. The quantitative phase of this study
incorporated probability samplings characterized by econometric equations and formulas. The result
of the analysis of the samples, gathered through probability technique, shall form the background
theories of how and what factors that drives overseas investors into Melbourne residential property
market.
On the contrary, a non-random and non-probability sampling technique shall be applied in the
subsequent qualitative research phase. This study will rely substantially on expert opinions that
form the sample data in search of the impact of new drivers in Melbournes residential property
market. Judgemental decisions of the researcher with regard to whom and which profession can
provide the best information to achieve the objective of the study represent the key feature of this
research phase (Teddlie and Yu, 2007). Only a selected group of Australian property professionals,
consultants and researchers will be targeted as interviewees for the study. The selection of
interviewees shall be based upon their involvement in the residential property industry and
seniority in their respective organization decision making process. In this sequential phase research
methodology, the second phase questions will be developed subsequent to the first phases
research outcomes and elaborates in-depth the results interpreted (Creswell and Clark, 2007,
Ivankova, 2006). The qualitative phase shall support and validate the determinants of overseas
89
investments in Australia residential property market. Teddlie and Tashakkori (2009) assert that
there are no rules for sample sizes in qualitative studies and typically purposive samples are small. In
this study, the sample size is of 15 to 20 participants aligned with grounded theory being the
backbone of the research design. The participants comprise of a crossed sectional range of experts
from both the overseas (China) property market and the local (Melbourne) property market.
3.6. Stage 1 - Quantitative Research

3.6.1. Data Sources
The Teddlie and Tashakkori (2009) assertion of an unobtrusive measure is terminology commonly
used for secondary data collection that includes written public records, written private records and
archived databases. The key advantages of using unobtrusive measures is that it allows the research
to gather data and report it in the original format, compared to the self-reported measures such as
questionnaires and interviews. Data collected through questionnaires and interviews has the
inherent weakness of being exposed to the possibility of inaccuracy bias with the responses
potentially being skewed. Logically unobtrusive measures have inherent problems. The data series
collected might be incomplete due to the reporting and recording being selective in nature.
The quantitative analysis phase in this research involves unobtrusive measures and data sources of
public records or archived databases from Australia and overseas to enable an objective modelling
of Australias residential property market. In this study, public records from China will be relied upon
as data sources from overseas. The subsequent sections involve discussion on various public records
and archived databases used to form the key data sources utilised this study. The residential
property performance data is from the following sources:
Real Estate Institute of Victoria (REIV) is the peak professional body for the Victorian real estate
agency industry with a current membership of over 2,000 real estate agencies in Victoria. These
members specialise in residential sales, commercial and industrial sales, auctions, business broking,
buyers, agency, property management, owners' corporation management and valuation. This
section constitutes the second phase of the study and involves the construct of a quarterly house
price dataset for the selected suburbs with access to Real Estate Institute of Victoria (REIV) data
base. The REIV gathers most of its data online from agents submitting their sales results
electronically plus a dedicated call centre to collect property sales results at the time of contract.
Table 3.6 illustrates the various public records and archived databases that form the data sources of
various independent variables used for this study:
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Table 3.6: Data Sources Leading Economic indicators

Independent Variables - Australia
I Space Market
Data
Source
1 GDP per capita ABS5206
2 Total Employed Labor Force ABS6202
3 Population growth ABS3101
4 Net Saving - Current Prices ABS5232(Table 32)
5 Net Overseas Migration ABS3101(Table 1)
II Capital Market
Data
Source
1 10-year bank bonds RBA F2.1 Cap Mkt Yields-Govn Bonds
2 ASX 200 Index Yahoo Finance
3 Exchange Rate RBA Bulletin F11 Exchange Rate
4 Mortgage Rates RBA Bulletin F5 Indicator lending rate
5 90-day bank bills RBA Bulletin
III Property Market

Data
Source
1 New Housing Supply ABS 8752 Dwellings Units Completed(Vic)
2 Building Planning Approvals ABS 8731 Building Approvals(Vic)
3 Rent Growth ABS 6401 CPI(Melbourne)
4 House Price Index ABS 6401 House Price Index(Mel)
5 Building Activity-Value of Building Work done(Residential Vic) ABS8752
The economic data is collected from the following sources:
The Australian Bureau of Statistics (ABS) collects and publishes Australian macroeconomic data and
conducts the Australian census every five years at an estimated cost in excess of AUD300million. The
ABS Data Quality Framework is internationally recognised and is based on the Statistics Canada
Quality Assurance Framework and the European Statistics Code of Practice.
The Reserve Bank of Australia is Australia's central bank and derives its functions and powers from
the Reserve Bank Act 1959. Its main role involves the conduct of the nation's monetary policy and
issues its currency. Its duty is to contribute to the stability of the currency, full employment, and the
economic prosperity and welfare of the Australian people. It does this by setting the cash rate to
meet an agreed medium-term inflation target, working to maintain a strong financial system and
efficient payments system, and issuing the nation's banknotes. Additionally, it manages Australia's
gold and foreign exchange reserves. RBA Bulletin is a quarterly publication by the Reserve Bank of
Australia which contains feature articles and speeches and statistical releases relating to key data
produced by the Bank. These releases are among the outputs of the Bank that are reported in
Latest News on the RBA website homepage.
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Yahoo Finance is media publishing that forms part of Yahoo!'s network. It provides financial news,
data and commentary including stock quotes, press releases and financial reports. According to
third-party web analytics provider Moses (2015), the website has over 52.3 million unique visits per
month and is ranked first among Finance and Investing sites.
The Australian Department of Education is a department of the Government of Australia charged

with the responsibility for national policies and programs to help Australians access quality and
affordable childcare; early childhood education, school education, post-school, higher education,
international education and academic research.
Australian Education Internationals (AEI) is the International Research and Analysis Unit providing
data, research and analysis on many aspects of international education in Australia and globally.
Data on international students studying in Australia is updated on a monthly basis. International
Group has built collaborative networks with key international organisations including the British
Council and the USA Institute of International Education, which hosts Project Atlas, an international
student mobility database. Table 3.7 illustrates the various public records and archived databases
that form the data sources from China for this study:
Table 3.7: Data Sources China Leading Economic Indicators
Independent Variables - China

I Space Market Data
Overseas(China) Source
1 Per Capita Disposable Income of urban Households, Accumulated(yuan) NBSC^
2 China GDP Growth Rate NBSC^
3 China CPI Inflation (All Items) OECD Library
4 China Outflow of FDI OECD Library
5 Price Index for Investment in Fixed Assets , Accumulated NBSC^
II Capital Market
Overseas(China)
1 Shanghai Stock Market Index Yahoo Finance
2 China Foreign Currency Exchange Rates OECD Library
3 China Short Term Interest Rates OECD Library
4 China Balance of Payments (MEI) OECD Library
III Property Market

Overseas(China)
1 Price Indices of Construction and Installation , Accumulated NBSC^
2 China Residential Buildings Floor Space Completed NBSC^
3 Floor Space Newly Started NBSC^
4 China Construction Output Value NBSC^
^ National Bureau of Statistic China
The China economic data sources are:
92
The Organization for Economic Cooperation and Development (OECD) is a forum where the
governments of 34 democracies work together to promote economic growth, prosperity, and
sustainable development. The market economies in the forum include more than 70 non-member
economies, of which China is one of the non-member economies. OECD iLibrary is the online library
of the OECD featuring its publications including books, papers and statistics and is the gateway to
OECDs analysis and data. OECD iLibrary also contains content published by the International Energy
Agency (IEA), the Nuclear Energy Agency (NEA), the OECD Development Centre, PISA (Programme
for International Student Assessment), and the International Transport Forum (ITF). OECD iLibrary
offers wide ranging research and knowledge to a variety of audiences: Universities and research
organisations; Businesses and private sector; Government and public administrations; Non-
Governmental organisations and think tanks.
The National Bureau of Statistics of the People's Republic of China (NBSC) is an agency within the
State Council of the People's Republic of China charged with the collection and publication of
statistics related to the economy, population and society of the People's Republic of China at
national and local levels with no means to ascertain the accuracy.
Samples of house prices collected will be based on two suburbs in Melbourne and may carry a risk of
not being a full representation of house price performance across Melbourne. Although ABS data is
ranked second in the world league in terms of most reliable statistics, the revision of all the
economic data is relatively less frequent. The REIV gathers most of its data online from sales
agencies submitting their sales results electronically and it also has a dedicated call centre to collect
property sales results at the time of contract. In this data gathering exercise, REIV only include areas
with 25, 30 or 50 sales per week in its snapshots thus might not be reflective of the house prices of
the entire suburbs. This study has not been able to ascertain the accuracy and validity of data
collected from overseas agencies such as the National Bureau of Statistics of Peoples Republic of
China (NBSC). Limited data in NBSC and different data clssification in OECD have compromised the
effort to replicate the Australian indepenant variables in Chinas secondary data collections. The
research resolves into the collections of replacement data such as China Residential Buildings
Floor Space Completed from NBSC replacing the New Housing Supply from ABS.
Notwithstanding the above statistics weaknesses, ABS, REIV, RBA and OECD data sources epitomized
the highest quality data from the respective Governmental and industry/institutional bodies. It is
envisaged that the quality of the statistical data from the Australian Governmental and institutional
bodies will be adequate to enable meaningful inferences of whats happening in the Australian
housing market.
93
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3.6.2. Data Analysis
Quantitative data analysis comprises mainly the analysis of numerial data using a variety of
statistical techniques with specific reference to descriptive and inferential techniques. Burns (1997)
and Bryman (2006) explained that descriptive statistics allows researchers to summarise large
quantities of data with the intention of discovering trends and patterns. Quantitative data analysis is
often referred to as deductive because it is used to test hypotheses and prediction. Descriptive
statistics tends to apply easy-to-understand measures to communication, the analysis and results.
Outcomes of descriptive analysis mainly comprises of means and correlations, classified as
inferential statistics. Inferential statistics are generally used to confirm or disconfirm the results
obtained from the descriptive results. For example, variance (ANOVA) and covariance (ANCOVA)
analysis are used to compare the means of two or more samples to determine if relationships
between variables (correlation coefficient and regression analysis) are truly different from zero (t
test and F test).
Tashakkori (2010) explained that a predictive quantitative design within the mixed method domain
involves correlational research and uses statistical analysis on the relationship between two or
multiple variables to forecast the future. This reseach falls into this classification of predictive
design method having house price performance in the selected suburbs will be forecasted to predict
the future trend and to validate the model. Performance and correlation analysis techniques used in
past studies will be adopted to determine the house prices performance in the selected Australian
residential property markets. The quantitative analysis is presented as below stages using tables and
graphs supported by commentary.
Quantitative Analysis Part One Target Suburbs
The rule for probability sampling is to utilise a small sample estimating the larger population
parameters (Wetcher-Hendricks, 2011). Part One of the quantitative research is to create
repersentative location samples which successfully attracted overseas settlers based on ABS
census data. Bartel (1989), Borjas (1994), Collins (2008), Leyvraz (2002), Ley and Tutchener (2001)
established that the relationship between migrants, offshore investments and the residential
housing market represents an important attribute in the increasing demand of residential property.
Figure 3.6 illustrates the steps involved in selecting the representative suburbs:
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Figure 3.6: Analysis of Overseas Settlers Favourite Suburbs
Two representative
Suburbs
Inferential
ABS Census Sampling -House prices of
Data Statistics Australia and
Melbourne
REIV House Descriptive
Prices Analysis -House prices for Two
Suburbs
Trend (Dependant Variables)
analysis
Validation : Trend and Descriptive Analysis
Source: Author
The research design will involve analysing and determining two Victorian suburbs that possess the
highest number of overseas settlers based on ABS census data. Comparing ABS census data between
2002 and 2013 and the recent market commentaries shed light into the Chinese settlers recent
settlement behavioural trends. The sample of Melbourne residential property markets constitutes a
smaller subset of the larger population of Australian residential property market. Using inferential
statistics, conclusions can drawn. The study first focuses on identifying one particular suburb in
Melbourne that had historically successfully attracted the largest or most significant number of
overseas settlers, followed by a suburb that had generated significant interest among the Chinese
settlers in recent times. The second selected suburb carries the characteristic of attracting a
significant degree of interest and observed incremental arrivals of Chinese settlers. The review of
Chinese-national settlement patterns is closely associated with the subsequent correlation and
regression analysis on the push factors from China. In summary, the objective of Part One is to
provide two specific suburbs in Victoria that satisfy two specific criteria, i.e. one should present a
sample that has the highest number of overseas settlers and the other having observed a significant
increment of Chinese settlers in recent times to be analysed alongside the performance of
Australian and Melbourne Metropolitan housing markets.
Quantitative Analysis Part Two House Prices Trend Analysis
Part Two involves gathering and analysing REIV house price data for the locations selected in Phase
One. Quarterly median house prices starting from the year 2002 to 2013 are collected for Australia,
Melbourne Metropolitan and the two representative suburbs selected from the ABS database. Each
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location provides a total of 48 data points with a total of 144 house price data points from the first
quarter 2002 to the fourth quarter 2013.
Median house prices from Melbourne Metro, Suburb 1 and Suburb 2 forms the dependant variable
for quantitative analysis to be carried out in this study. In order to improve the analysis and
minimize seasonal variation, a yearly or four quarters Moving Average was applied to the data
points to provide smoothing average house prices for all locations. Consequently, each location will
provide a total of 45 data points. This exceeds the 30 data points required to ensure data are
normally distributed and adequately covered as recommended by Yin (2013).
Additionally statistical testing was applied to further validate house price data to further increase
confidence that the sample is representative of the entire population by descriptive analysis
alongside trend plotting. Median house prices collected from REIV for the selected suburbs were
analysed alongside ABS census data for the entire country and Melbourne Metropolitan. The trend
of median house prices in Australia and Melbourne Metropolitan was compared against the trend of
median house prices in the two selected suburbs providing the basis of visual descriptive analysis
and inferential sampling. Consistent house price trends and patterns among all the selected
locations provide vital statistical validation that house price performance in the two selected
suburbs (REIV data) closely resemble Australian house prices as the larger population (ABS data).
House prices were indexed using the base period of September (3rd quarter) 2003 for all samples
used in the analysis.
Quantitative Analysis Part Three Descriptive Analysis, Coefficient of Determination and Multiple
Regression Equation
Nagelkerke (1991) depicted the use of R (coefficient of determination), also called the multiple
correlation coefficient. It is well established in classical regression analysis. Its definition as the
proportion of variance 'explained' by the regression model makes it useful as a measure of success
of predicting the dependent variable from the independent variables.
In the third part of the quantitative analysis, historical leading economic indicators and emerging
market determinants will be analysed based mainly on the Higgins (2010) model to provide a
structural approach to explore the significance of relationships in terms R and regression
significance between the DV and IV. The three predictive economic equations showing the best
inter-relationship of separate economic variables to house prices form the forecasting and
validation model for the entire quantitative analysis of this study. The independent determinants
97
were allocated into each of the Space, Property and Capital markets respectively. This was depicted
in Section 3.6.1 and Table 3.6 of this Chapter.
Alongside with the traditional leading economic indicators, three emerging factors identified in
Chapter One and Chapter Two will be incorporated in both correlations and regression analysis to
explore the inter-relationship of these non-traditional factors with Melbourne house prices and
other historical leading economic indicators. Table 3.9 shows the emerging factors included in the
study:
Table 3.8: Non-traditional Emerging Determinants
Non-Traditional Factors
Data Source
1 Long Term Visitor Arrivals ABS3401
2 International Student Enrolments in Victoria AEI
3 Short Term Visitor Arrivals - Victoria ABS3401
Leading Chinese historical economic indicators were identified in Section 3.6.1 and Table 3.7 of this
Chapter and analysed systematically utilising the push & pull model established in this study. Due
to the potential limited Chinese data availability, descriptive analysis forms the major QUAN analysis
on Chinese historical economic data to provide an easy-to-understand graph, chart and analysis
result, in addition to correlation analysis.
The nature of the relationship between the variables for determining the drivers of offshore investor
buying activities in these suburbs was analysed using three datasets or 135 house prices (DV) data
points and 32 datasets or 1,395 data points of economic indicators, non-traditional factors and
Chinese Key Economic Indicators (IVs). The completion of this phase gave rise to the resulting
analysis of 35 data sets covering a period of 12 years for observation starting from the first quarter
of 2002 to the final quarter of 2013.
Data analysis in this research covered data collected from 2002 to 2013 and excluded data points
subsequent to 2013 due to limited up to date data availability at the analysis phase of this study.
Verifications of the model were conducted using house price data from the second and fourth
quarters of 2014 respectively at the later stage of the research. All data collected were smoothed
using a 4-quarters or one year moving average to avoid seasonal variations. Two-tailed hypotheses
were used to test the relationship between house prices in the two suburbs against the entire list of
economic indicators listed.
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Three statistical analysis methods were applied to analyse the strength of the relationships between
the DV (House Prices) and IV (Australian Leading Economic Indicators, Non-traditional factors and
China Leading Economic Indicators) to confirm the validity of the model, namely:
i. Lagged Economic Indicators the economic indicators were re-entered using lagged data
methodology. As changes in macroeconomic activity may take time to affect residential
property market performance, the IVs will be lagged for eight quarters. The two-year lag
provides sufficient time for the assumed property and macroeconomic activity to flow on to
residential property performance.
ii. Correlation Matrix Pearson Correlation Coefficient (R) this methodology is applied to
analyse the nature and relationship between the key economic factors of Australia, non-
traditional factors and Chinese leading economic indicators (IVs) and house prices of the
selected area of interest (DV). SPSS software was used to compute the Pearson correlation
coefficients, r, along with the significance levels. This quantitative research phase would
establish if there was a significant relationship between the traditional and non-traditional
indicators with the median house price data of the selected suburbs. The operationalised
hypothesis depicted that the research rejects the null hypothesis if there is statistically
significant correlation between the economic indicators with Melbourne house prices. The
strength and direction of the correlation between the house price performance in each and
every location and significant influencing economic indicators were identified for both
current periods and for periods lagged by eight quarters. To determine whether individual
correlation coefficients were significantly different from zero, t tests at the 95% and 99%
confidence levels were applied to the correlation results.
iii. Multiple Linear Stepwise Regression - to fit a linear regression line using ordinary least
squares method. The idea of this method is to predict that the relationship between the
predictor (House Prices) and DV (indicators from Space, Capital and Property Markets) is
explained by a linear or straight line, relationship. The single regression equation to assess
the correlations between the house prices and various independent variables can be
expressed as:
Regression Model Equations
(MELBOURNE
METROPOLITAN HOUSE = (Space datasets -,....) +
PRICE MOVEMENT) (Capital datasets -, ................) +
(Property datasets -,.................)
(SELECTED SUBURBS HOUSE
= (Space datasets -,....) +
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PRICE MOVEMENT) (Capital datasets -, ................) +

(Property datasets -,.................)
The review of literature revealed three key statistical tests to confirm the validity of the residential
property forecast model:
a. Coefficient of determinant (R)
R reflects the proportion of variability in the DV that can be explained by a linear relationship with
the predictor variables. The R measures the goodness of fit for linear regression. The better the line
fits the data, i.e. the closer the data points sit to the line, the higher R will be. If there is no linear
relationship between the predictor and the DV, R = 0 or close to it.
b. Sig-value or p-value
If the Sig-value or p-value is less than 0.05 significant levels, we reject H. There is statistically
significant evidence that the data fits a linear regression model
c. Statistical test for bias (t-test)
T-test is a measure to determine if there is bias and the errors are normally, or nearly normally,
distributed. The "t'' statistic is computed by dividing the estimated value of the parameter by its
standard error. This statistic is a measure of the likelihood that the actual value of the parameter is
not zero. The larger the absolute value of t, the less likely that the actual value of the parameter
could be zero.
d. Durbin Watson Statistics (DW)
This is a test to detect patterns in a series of errors. The Durbin-Watson test for autocorrelation is a
statistic that indicates the likelihood that the deviation (error) values for the regression have a first-
order autoregression component. The regression models assume that the error deviations are
uncorrelated. The Durbin-Watson Statistic is used to test for the presence of serial correlation
among the residuals. As a general rule of thumb, the residuals are uncorrelated if the Durbin-
Watson statistic is approximately 2. A value close to 0 indicates strong positive correlation, while a
value of 4 indicates strong negative correlation. This can be summarised as:
i. an indication of how close a fit the regression equation is to the dependent time series.
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ii. Statistical test for bias (t-test) a measure to determine if there is bias and the errors are
normally, or nearly normally, distributed.
iii. Durban Watson statistics (DW) a test to detect patterns in a series of errors.
The main statistical software for this analysis was SPSS. The subprogram Multiple regression:
stepwise forward model was used to provide an acceptable regression equation to assess the
correlations and predict future residential property performance. A significance level of 0.05 with a
non-zero intercept was chosen as the model parameter. The above statistical testing techniques
shall be applied across the datasets selected, broken down to three statistical tests as set out below:
i. Statistical Test #1 Australian Key Economic Indicators: To explore the existence of a

significant relationship between the Australian leading economic indicators and median
house prices in Melbourne Metropolitan and the 2 selected suburbs.
ii. Statistical Test #2 Non-traditional Social Economic Indicators: Two non-traditional
factors, namely Education (International Student Enrolments) and Residential Tourism
(Long Term and Short Term Tourist Arrivals) will be introduced and the same methodology
shall be applied to test their relationship significance with the median house prices of the
selected suburbs.
iii. Statistical Test #3 Chinese Leading Economic Indicators: To explore the existence of a
significant relationship between the Chinese leading economic indicators from the
respective Space, Capital and Property markets and the median house price data in
Melbourne Metropolitan and the 2 selected suburbs.
The regression analysis assisted in the understanding of how the typical house price changes when
any one of these independent variables is varied, while the other IVs are held fixed. The regression
analysis will assist in estimating the house prices given the DVs that is, the median value of the
house prices. The relationships between the two non-traditional factors or determinants were
tested for both correlations and the historical relationship between the predicted and actual
performance fitting the regression model. The expected industrys interpretations on the potential
correlations direction (positive (+) or negative (-)) of all the independent variables compared against
house prices in Australia are listed in Appendix I.
The data rationales and industrial interpretation on the correlation direction shall serves as the
foundation of result presentation in the subsequent Chapter.
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3.7. Qualitative Phase

3.7.1. Semi-Structured Interview
The goal of any qualitative research interview covers a range of approaches to the interviewing
process. Its goal is to see the research topic from the perspective of the interviewee, and to
understand how and why he or she comes to have this particular perspective (King et al., 1994). That
the researcher selects which profession can provide the best information to achieve the objective of
the study and select the most appropriate representatives is a key feature of this research phase
(Teddlie and Yu, 2007).
King (1994) and Teddlie (2009) affirmed that a questionnaire can be qualitative (open-
ended/unstructured), quantitative (closed-ended/structured) or mixed methods (semi-structured).
King (1994) refers the mixed methods as structured open-response interview that carries the
following characteristics:
i. It uses an interview schedule (like the structured interview).

ii. Questions follow a set order.
iii. There is flexibility in the order groups of questions are asked.
iv. These interviews tend to focus on factual information and general evaluative comments.
Open-ended questions tend to be useful in soliciting interviewees opinions, attitudes and

perceptions of the respondents. Closed-ended questions provide easily quantifiable information
through applying a detailed schedule with questions asked in a specific order and questions are
mostly closed. Every effort is made to control the way these questions are asked in order not to bias
the responses of different interviewees. A closed-ended approach is useful if the researcher intends
to elicit factual information (King et al., 1994).
The qualitative phase supports and validates the outcomes of the first phase on the introduced
determinants of overseas investment in Australia residential property market. The research
technique shall be non-random and non-probability in the qualitative research phase to rely on
expert opinions that form the sample data in search of the new drivers in Melbourne residential
property market. The evaluation of new determinants in the Australian residential property market
can be construed through feedback and discussions with the relevant stakeholders. This research
technique uses a qualitative assessment approach with semi-structured interviews selected for the
study. This method allows for a focus on a particular unit of analysis rather than the collection and
analysis of data (Willig, 2013, Yin, 2013).
102
The questionnaire design in this study uses a mixed method questionnaire (semi-structured) that
incorporates both closed-ended and open-ended elements. The qualitative semi-structured
interview in this study has the following aims:
i. To identify factors, referring to the Space/Capital/Property markets, causing or influencing

overseas investors decision on the Australian residential property market.
ii. To identify government policies and to understand the rationales and extent of such
government policies causing offshore investments in the Australian residential property
market.
iii. To evaluate the impact two non-traditional factors had on overseas investors decision
making.
Only a selected group of Australian property professionals, consultants and researchers were
targeted as interviewees for the study. The selection of interviewees is based upon their
involvement in the residential property industry and seniority in their respective organisations
decision making process. In this sequentially phase research methodology, the second phase
questions are developed subsequent to the first phases research outcomes and elaborates on the
results (Creswell and Clark, 2007, Ivankova, 2006). The qualitative phase will help support and
validate the determinants of overseas investment in the Australian residential property market.
Teddlie and Tashakkori (2009) explained that there are no rules for sample size in qualitative studies
and typically, purposive samples are small. In this study, the sample size required is 15 to 20
participants aligned with grounded theory being the backbone of the research design. The
participants comprise of wide range of experts from both the Chinese property market and the
Melbourne property market.
Establishing effective communication in interviews with participants is crucial for the success of this
second phase of qualitative research. Howell (1989) emphasised that a people problem can arise
in a bureaucratic structure and hinder an effective communication among the participants of a
project. The use of appropriate management skills (i.e., effective communication and conflict
resolution) and the development of a favourable context (e.g., mutual trust and long-term
commitment) are critical to partnering success (Cheng et al., 2000). Argenti (2005) illustrated that
the framework for strategic communication comprises a wide variety of iterative loops,
encompassing multiple connections with multiple constituencies on multiple strategic levels. As a
result of the literature review, Figure 3.7 Illustrates a model established to seek better
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understanding of the communication channel between the property professionals and the offshore
investors:
Figure 3.7: Effective Communication Channels with the Offshore Investors
Source: Author
Figure 3.7 illustrates the interactivity loop that facilitates any potential effective communication
between the property professionals and the potential local and overseas property investors.
Effective communication loops involving property professionals typically comprise of Property
Consultants, Agencies, Developers and Legal and Financial Advisors. They are the key players in the
property industry who uphold the role of vital information providers to investors.
Following on Figure 3.8 details the interview approaches adopted in this study to ensure adequate
and strategic coverage of key players in the property industry. A planned systematic interview
approach is crucial to ensure the best responses are obtained from the experts in their field to
achieve the objective of this study. Various leading property professionals are interviewed to
identify factors encouraging offshore investments in the Australian residential property market.
Figure 3.8 sets out the plan adopted in the interview with the selected property professionals:
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Figure 3.8: Interview Plan for Leading Property Professionals
Australia Melbourne Property New Supply

Market
- 8 interviewees
Reas Estate Consultants Property Financial/Legal

Developers Professionals
Local & Overseas
Property Researchers
Agents
China
Market Reas Estate Consultants Financial/Legal Professionals
- 7 interviewees
Property Agents Researchers
Chinese Investors
Source: Author
Figures 3.7 and 3.8 demonstrate the four key stakeholders in the residential housing market
representing four different professional sectors, namely real estate consultants, financial and legal
professionals, property agents and property reserchers. Two stakeholders from each category are
interviewed to provide a range of opinions and experiences. The interview exercise is expanded to
interviews conducted in China to address the push factors of offshore investments in Australia.
Property Market involves supply conditions that are very much associated with the policy
implementation and eventual supply conditions of local (Australian) property settings or in other
words, not correlated to offshore property market conditions. As such only the local residential
property developers will be interviewed due to the Australian Government policies for offshore
purchasers to buy only new developments.
As a result the offshore Government policies assessment will be centred mostly on Space and
Capital market determinants. Eight and seven interviews were conducted consequentially in both
Australia (Melbourne) and China (Shanghai) making a total of 15 interviews with key real estate
stakeholders in two countries. Two versions of the questionnaries were formulated specifically for
Chinese and Australian interviewees (Appendices II & III) with a total of 12 interview questions for
each segment. Codes have been assigned to each interviewee (Appendix IV) to ensure the responses
were de-identified, providing anonymity for the participants. These codes were used to report
interview responses.
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The interviews were undertaken in June and August 2015 at the interviewees place of work, lasting
between 30 and 60 minutes covering Government policies, information on foreign investors,
property market conditions, tourist arrival and international student enrolment information.
Interview participants were identified through the authors and RMIT Universitys networks. Ethics
approval was duly obtained from RMIT University Design and Social Context College Human Ethics
Advisory Network (CHEAN) on the 14th October 2014.
3.7.2. Qualitative Analysis
This stage involves the analysis of narrative data gathered from the semi-structured interviews with
the selected property professionals from Australia and China. Teddlie and Tashakkori (2009)
explained that qualitative data analysis is classified as inductive as it is utilized to discover
emergent themes.
In this research particularly, data collected from semi-structured interviews are used to both
discover the emerging trends in Australian residential property market and validate the research
findings of the quantitative research. The qualitative data collected (descriptive and narrative) were
audio recorded and transcribed. The transcripts were thematically coded using the qualitative
analysis software, NVivo.
3.8. Summary
It is imperative that appropriate techniques are applied to facilitate the potential of allowing
multiple ways of thinking and steering the study into different perspectives of seeing and hearing,
multiple ways of making sense of the social world, and multiple standpoints on what is important
and to be valued in the context of social inquiry. Empirical evidence affirmed that mixed methods
multiple approaches to social inquiry and that each and every approach to social inquiry is partial to
the entire event forms the basis of this research approach. Better understanding of the multifaceted
and complex character of the housing market in Australia can be obtained from the use of multiple
approaches and ways of investigation. A mixed methods research generates questions, alongside
possible answers that are both smooth and full of relative certainties alongside possibilities and
even surprises, offering some stories not yet told (Greene, 2008).
This Chapter examined the philosophical orientation, methodology and design for the data
collection and analysis phases. This study uses a sequential mixed method data analysis strategy
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(QUAN -> QUAL) in which the quantitative and qualitative data analysis strategies were combined,
connected or integrated in one research study in search of relative certainties alongside possibilities
and stories not yet told in the Australian residential property market. The mixed methods data
analysis techniques were both statistical and thematic in nature in order to solicit better
understanding of the multifaceted and complex character of overseas investment in the Australian
residential property market (Greene et al., 1989, Teddlie and Tashakkori, 2009).
Higgins (2010) model guides the research approach to provide a structural approach to assess key
economic indicators identified alongside with the residential property market performance. The
dynamic and at times complicated interconnectivity of the key factors can be systematically
allocated into Space, Property and Capital Market using this model to facilitate proper and orderly
analysis. A Push & Pull model was additionally developed in this study to provide a structural
approach to evaluate the potential impact and influences resulting from overseas Governments
policies.
Based on the intended mixed method explanatory design for this research, the data collection
strategy is focusing on facilitating the study of how, who and why using secondary data and
semi-structured interviews. The first phase involves unobtrusive measures data collection from
reputable agencies such as ABS, REIV, RBA, AEI, OECD and NBSC. The resulting analysis from the
quantitative research provided the grounded theory for the subsequent qualitative analysis phase
that involves semi-structured interviews with the real estate professionals both in Australia and
China. Similarly, sequential sampling mixed method analysis is applied in this study whereby
probability sampling is followed by a purposive sampling technique. The quantitative phase includes
probability sampling characterised by econometric equations and formulas and the qualitative
phase includes a non-random and non-probability sampling technique relying substantially on
expert opinions on Australian housing market.
Quantitative data analysis comprises mainly the analysis of numerical data using a variety of
statistical techniques with specific reference to descriptive and inferential techniques. Burns (1997)
and Bryman (2006) explained that descriptive statistics allows researchers to summarise large
quantities of data with the intention of discovering trends and patterns. Quantitative data analysis is
often referred to as deductive because it is used to test hypotheses and prediction. Descriptive
statistics tends to apply easy-to-understand measures to communicate the analysis and results.
Outcomes of descriptive analysis mainly comprise of means and correlations, classified as
inferential statistics. Inferential statistics are generally used to confirm or disconfirm the results
obtained from the descriptive results. This research falls into the classification of a predictive
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design method given its focus on house price performance in the selected suburbs being forecasted
to predict future trends and to ensure validity of the model. Performance and correlation analysis
techniques used in past studies were adopted to determine the house price performance in the
selected Australian residential property markets.
In this sequential phase research methodology, the second phase questions are developed
subsequent to the first phases research outcomes and elaborates in-depth the results interpreted
(Creswell and Clark, 2007, Ivankova, 2006). Its goal is to see the research topic from the perspective
of the interviewee, and to understand how and why he or she comes to have this particular
perspective (King et al., 1994). The qualitative phase supports and validates the study conducted in
the first phase on the new determinants of overseas investments in the Australian residential
property market.
The next Chapter provides the analysis and resultant discussion of the quantitative research phase.
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Chapter 4:
Quantitative Analysis
4.1 Introduction
The main objective of this Chapter is to examine the relationship and validity that various key
determinants have on house prices in Melbourne Metropolitan and two selected Melbourne
locations. Appropriate statistical techniques as discussed in Chapter Three (Section 3.6) were
employed in this explanatory study to examine the relationship and interactions between traditional
key economic indicators and the emerging determinants to explore the best model to explain the
performance of house prices in the selected locations. The Quantitative analysis is guided by the
Push & Pull model (see Chapter Three Section 3.2.2) established in this thesis to ensure
consistency and systematic research implementation.
Part One of the Quantitative research involves analysis a decade of ABS census data and the market
updates in search of two representative suburbs in the Australian State of Victoria that attracted the
most Chinese settlers between 2001 and 2011. In Part Two of this research, median house prices
(from REIV) of the selected suburbs together with house price performance in Melbourne
Metropolitan were analysed descriptively with visual plot and charts to examine their historical
performance for the period 2003 to 2013. Statistical testing techniques including Pearson
Correlation Coefficient methodology, Stepwise Time Series Regression methodology and Descriptive
Analysis were employed in part three of this research phase to provide three predictive models to
confirm the validity of emerging determinants. This part of the study evaluated the correlations and
significance of two non-traditional determinants from Space Market, namely Education and
Residential Tourism. The relationships between these non-traditional factors were tested for both
correlations and the historical relationship between the predicted and actual performance fitting
the regression model. The last part of the quantitative phase involved utilising the descriptive
analysis on various traditional economic data from China and compares them with house price
performance in the selected locations. The objective of this investigation is to establish if overseas
factors, especially from a significant offshore investor in Australia like China, had emerged as
influencing determinants on the Australian residential property market.
This chapter has eight sections. Subsequent to Section 4.1 introduction, Sections 4.2 and 4.3 present
the most popular suburbs for immigrants and purchaser in Melbourne and the analysis of house
prices in the selected locations. Section 4.4 presents the Correlation Matrix and Stepwise Regression
109
analysis and the resulting discussion examining the impact of Australian traditional economic factors
and determinants on house prices in the selected locations. Section 4.5 presents the analysis and
results of non-traditional factors and determinants, namely Education and Tourism factors. Section
4.6 assesses the Push factors from China. The final results and key summaries for the Quantitative
Analysis phase are presented in Sections 4.7 and 4.8.
4.2. Melbourne Population Overseas Settlers
Empirical evidence reveals that from a macroeconomic perspective, the increase in immigration
activities in the host countries had direct impact on the real estate market (Bartel, 1989, Borjas,
1994, Collins, 2008, Ley and Tutchener, 2001). The influx of migrants contributed a significant
portion of overseas buying of residential properties in Australia. Farrell (1997) and Murphy and
Watson (1994) revealed that Australias policies of encouraging business migration produced large
inflows of capital. Substantial offshore capital was channelled into property investments. Among the
property sub-sectors purchased by offshore investors, residential housing has constituted an
important element in shaping Australian real estate markets. The direct relationship between
migrants and the residential housing market represents an important attribute to the increasing
demand for residential property (Leyvraz and Redner, 2002).
Many forms of migration generated tourism flows, in particular through the geographical extension
of friendship and kinship networks. Migrants became the attractions of tourist flows into Australia,
while they themselves became tourists returning to visit friends and relations in their countries of
origin. These flows of tourism are structured throughout the life of the migrants, with each
temporary or permanent round of migration creating a new spatial arrangement of friendship and
kinship networks, which represent visiting friends and relations (VFR) tourism flows (Dwyer, 2010;
Williams, 2000).
Tourism may also generate migration flows. Most obviously through the demand generated for
labour which, if it cannot be met locally, will stimulate labour migration (Monk and Alexander,
1986). Such labour mobility may be differentiated by nationality, gender, ethnicity and skills,
depending on the particular features of the tourism industry, and the local labour market (King et
al., 1995). In addition, tourism may contribute to defining the search spaces or natural destinations
(cultural agglomeration) of migrants (Brown and Moore, 1970), whether these are labour, lifestyle
or retirement migrants (Snepenger et al., 1995).
It is based on the above literature reviews that the first part of phase one of this research design
involved collecting and analysing the ABS census data to determine which two Victorian suburbs
110
received the largest number of overseas settlers historically. This study selected and analysed the
house prices movements of Melbourne Metropolitan with two suburbs that are representative
samples of overseas settlers in Melbourne. In the initial stage this study focus was given to a suburb
in Melbourne that had successfully attracted a substantial number of overseas settlers, followed by
a suburb that had recently generated significant interest among the Chinese settlers and observed a
significant increment of Chinese residents between 2001 and 2011 based on ABS census data. The
second selection has a specific focus on Chinese settlers and the subsequent analysis on this suburb
was closely associated with a case-study like analysis mapping the push factors from China that
drove Chinese investing in Australian residential property market. Summarily, the objective of this
phase of research is to provide two specific Melbourne suburbs that satisfy two specific criteria,
being:
i. the highest number of overseas settlers historically

ii. observed recent significant increment of Chinese permanent settlers.
According to the 2011 ABS Census, there were 5.3 million migrants in Australia, which translates to
one in every four (26%) Australian residents were born overseas. The largest contributor to
Australia's migrant population continues to be people born in the United Kingdom (UK). In the 2011
Census, 1.1 million Australian residents were born in the UK, around one in every twenty Australian
residents. Australian residents born in New Zealand were the second largest nationality of migrants,
at close to half a million people (483,000). This was followed by migrants born in China (319,000),
India (295,000), Italy (185,000) and Vietnam (185,000). Cumulatively, migrants born in these six
countries accounted for about half (49%) of all migrants in Australia in 2011 (ABS, 2014). Figure 4.1
provides the list of the top 15 countries of birth of overseas born Australian residents.
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Figure 4.1: Migrants in Australia by Country of Birth 2001 and 2011
Number of People '000

0 200 400 600 800 1000 1200
Country
United Kingdom
New Zealand
China
India
Italy
Vietnam
Philippines
South Africa
Malaysia
Germany
Greece
Sri lanka
USA
Lebanon
Netherlands
2001 2011
Source: ABS 2014
ABS (2014) publication of 2011 census data showed migrants had a tendency to settle in major
Australian urban areas in comparison to people born in Australia. While 64% of Australian born lived
in a major Australian urban area in 2011, 85% of those born overseas lived in a major urban area.
The extent to which migrants settled in urban areas differs by their country of birth. In 2011, some
of the most urbanised population groups in Australia were migrants born in Somalia (98%), Lebanon
(97%), Macau (97%), and the Former Yugoslav Republic of Macedonia (97%). Migrants born in
nations like China (97%), Vietnam (97%), Greece (95%) and India (93%) were also highly urbanised.
Across the Australian capitals, some common trends in settlement were evident. Suburbs located in
or near city centres were strongly favoured by migrants. With the exception of Hobart and Darwin,
the central business districts (CBDs) of every capital city in Australia had more than half its residents
born overseas in 2011 (ABS, 2014).
Suburbs incorporated or situated near universities also featured high proportions of migrants. These
include suburbs like Clayton (70%) in Melbourne, Robertson (62%) in Brisbane, Bentley and Crawley
(both 62%) in Perth, Bedford Park (49%) in Adelaide, and Acton (57%) in Canberra. In some cities,
new or redeveloped suburbs have attracted large numbers of migrants, such as Wolli Creek (68%) in
Sydney, Jindalee (62%) in Perth and Franklin (44%) in Canberra (ABS, 2014).
112
In a small number of cases, suburbs with large overseas born populations did not necessarily reflect
the settlement preferences of migrants. This was notable in the Darwin suburbs of Coonawarra
(50%) and Eaton (44%) where large overseas born populations reflected the fact that these suburbs
contained immigration detention facilities.
Melbourne is an attractive city for migrants with a legacy of settling AngloCeltic, Southern European,
and Asian migrants over its 150 year history. Melbourne promoted itself as a diverse city that
provides education and employment opportunities to new arrivals. Figure 4.2 exhibits the largest
migrant groups in Melbourne according to the country of birth.
Figure 4.2: Migrants to Melbourne by Country of Birth 2001-2011
Number of People '000

0 20 40 60 80 100 120 140 160
Country
United Kingdom
India
China
Vietnam
Italy
New Zealand
Greece
Sri lanka
Malaysia
Philippines
South Africa
Germany
Hong Kong
FYROM(B)
Malta
2001 2011
Source: ABS 2014
Migrants in Melbourne were most concentrated around three locations. In the city centre in 2011,
close to two thirds of the residents of Melbourne CBD (68%), Carlton (63%), and Southbank (61%)
were migrants. The close proximity of these suburbs to the University of Melbourne, RMIT
University, and a range of other higher education providers made them especially popular with
international students. In 2011, a quarter of the population of Melbourne CBD and a third of the
population of Carlton were international students. To the west of the city, the suburbs of St Albans
(62%), Sunshine North (58%) and Braybrook (57%) also had large proportions of people born
overseas. Significant countries of birth for migrants in these suburbs included Vietnam, India and
113
Malta. To the citys southeast, Clayton (70%), Clayton South (65%), Springvale (69%), Springvale
South (59%), Noble Park (60%), and Dandenong (67%) were also strongly populated with migrants
(ABS, 2014). Figure 4.3 shows the proportion of overseas born people in each suburb in Melbourne.
Figure 4.3: Percentage of Migrants in Melbourne by Suburbs 2011
Source: ABS 2014
Although these suburbs are close to each other, the characteristics of migrants within them varied.
In Clayton, for example, migrants tended to be younger, more recent arrivals to the country with a
median age of 27 years and a median length of residence in Australia of 4 years (Clayton also has a
campus of Monash University). The statistics of major suburbs in Victoria, Australia that attracted
most overseas migrants are shown in Table 4.1:
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Table 4.1: Most Popular Suburbs for Migrants in Melbourne 2011
Melbourne %
Clayton 70.1
Springvale 68.8
Melbourne 68.1
Dandenong 67
Clayton South 64.6
Carlton 62.9
St Albans 62
Southbank 60.6
Noble Park 60.1
Springvale South 59.4
Source: ABS 2014
Table 4.1 shows that Clayton inherited the highest numbers of overseas settlers among all the
suburbs and was nominated in the ABS census 2014 as the top suburb located in or near the city
centre of Melbourne that was most favoured by migrants. Clayton was therefore selected as a
suburb to be further explored in this study.
In Melbourne, migrants born in China form a sizable and growing demographic group. Similar to
Indian born migrants, the number of Chinese born migrants living in Melbourne has grown
considerably in the past decade, more than doubling between 2001 and 2011 (from 36,000 to
90,000). Areas of Melbourne where Chinese born migrants were most strongly concentrated were in
Melbournes CBD (13%) and in a number of suburbs to the citys east. Box Hill (22%), Clayton (18%)
and Notting Hill (12%) had relatively large Chinese born populations. The suburbs which attracted
the majority of the Chinese born migrants is revealed in Table 4.2:
Table 4.2: Melbourne Suburbs with Highest Percentage of Persons Born in Selected Countries
- 2011
United Kingdom India China Vietnam

% % % %
Bangholme 19.7 Laverton 15.1 Box Hill 22.3 Sunshine North 24.9
Mount Eliza 13.2 Glen Huntly 1.5 Clayton 17.8 Braybrook 23.4
Monington 12.8 Clayton South 14.8 Melbourne 13.0 Springvale 22.3
Mount Martha 12.7 Williams Landing 14.6 Burwood 12.0 Springvale South 19.4
Safety Beach 11.5 Albion 14.6 Kingsbury 12.0 Caimlea 18.6
Mount Dandenong 10.5 Dandenong 12.2 Box Hill North 11.6 St Albans 17.2
Franston South 10.4 Springvale 11.1 Notting Hill 11.6 Maidstone 16.6
Sandringham 10.0 Sydenham 11.0 Burwood East 11.3 Kings Park 14.1
Kalorama 10.0 Clayton 10.3 Doncaster 11.1 Sunshine West 13.8
Emerald 9.9 Truganina 10.3 Carlton 11.0 Sunshine 12.3
Total Melbourne 4.3 Total Melbourne 3.0 Total Melbourne 2.6 Total Melbourne 1.9
Source: ABS 2014
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Three suburbs in Victoria had the highest number and the most significant increment of Chinese
settlers, namely Box Hill, Clayton and Burwood for the decade between 2001 and 2011. Notably
Clayton was again one of the favourite suburbs for Chinese migrants.
The ABS census 2011 also revealed that there was a significant increment of Chinese residents in
other up and coming suburbs, one of them being Doncaster. Doncaster is not ranked as high as
Box Hill and Clayton in terms of catchment of largest Chinese migrants. However various market
commentaries and observations had on numerous occasions suggested that Doncaster has emerged
as one of the favourite suburbs for Chinese settlers. According to Yang (2014), where land
transactions mostly take place between private owners and buyers, most focus on inner city
locations such as Melbourne, Southbank, South Yarra and St Kilda, as well as areas popular for
Chinese residents such as Doncaster, Box Hill and Glen Waverley. In Melbourne, Chinese buyers
overlook the northern, western and southern suburbs that are favoured by the Vietnamese, and
instead focus on the city centre. Chinese born locals were moving further east, to St Kilda, Box Hill,
Glen Waverley and Doncaster because of the quality schools and an established Chinese community
(Allen, 2013). As a result of the above reviews, Doncaster was chosen as the second suburb to
evaluate the drivers of Chinese investment in the Melbourne residential property market.
Conclusions were drawn from the review of ABS census data and empirical studies that Clayton and
Doncaster possessed the common and community characteristics for Chinese settlers arriving in
Australia. This research includes median house prices in Australia and Melbourne Metropolitan for
benchmarking purposes concurrent with the analysis of the two selected suburbs.
4.3. Melbourne Residential Property Market Performance
This section constitutes the second part of phase one of the study involving the construct of a house
price dataset for the selected suburbs using Real Estate Institute of Victoria (REIV) quarterly data.
REIV is the leading professional associations for the Victorian real estate industry with currently over
2,000 real estate agency members. These members are from all facets of real estate industry
including residential sales, commercial and industrial sales, auctions, business broking, buyers,
agency, property management, owners' corporation management and valuations. The REIV gathers
most of its data online from agents submitting their sales results electronically and plus a call centre
to collect property sales results at the time of contract.
Australian quarterly median house prices starting from year 2002 to 2013 were extracted from ABS
database. Melbourne Metropolitan, Clayton and Doncaster median house prices for the same
period were collected from REIV. Each location provided a total of 48 data points giving rise to a
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total of 192 house price data points from the first quarter 2002 to the fourth quarter 2013. This
database forms the dependant variable (DV) for the subsequent quantitative analysis. To avoid
seasonal variation a yearly, or 4 quarters Moving Average technique was applied to the house prices
data points to provide a 4 quarters smoothing average for improved analysis. Consequently, each
locality provides a total 45 data points that exceeds the minimum of 30 data points to ensure data
are normally distributed and adequately covered.
House prices in the selected locations and metropolitan collected from REIV were analysed
alongside with the ABS Australian house prices. House prices were indexed using the base period of
September (3rd quarter) 2003 to analyse the house price trend for all locations. This data collection
strategy facilitated a logical statistical validation on median house prices collected by comparing
median house prices collected from REIV with the median house prices collected from ABS with
chart and trend analysis. If both collated in the similar manner, the imbedded trend analysis can
provide a meaningful indication if Melbourne house price movements reflect the larger population
of Australian residential property market performance. Figure 4.4 exhibits the median house prices
of Australia, Melbourne Metro and 2 suburbs in Victoria obtained from REIV and ABS database.
Figure 4.4: Australia, Melbourne Metropolitan, Clayton and Doncaster House Price Trend
240
Australia MelMetro Clayton Doncaster

220
200
180
Index
160
140
120
100
May-13
May-04
May-05
May-06
May-07
May-08
May-09
May-10
May-11
May-12
Jan-05
Sep-03
Jan-04
Sep-04
Sep-05
Jan-06
Sep-06
Jan-07
Sep-07
Jan-08
Sep-08
Jan-09
Sep-09
Jan-10
Sep-10
Jan-11
Sep-11
Jan-12
Sep-12
Jan-13
Sep-13
Pre-GFC Period GFC Post GFC Stimulus Package 1: Economic Period of no stimulus
stimulus package worth AUD10.4 billion was package. Sovereign debt
announced and implemented in Dec 2008 crisis in Europe. Period of
acceleration of mortgage
Post GFC Stimulus Package 2: Second, larger debt. Households opt to
economic stimulus package was announced pay off loans rather than
by the Australian Goverment in Feb 2009 pile on more debt in the
with AUD47 billion allocated to help boost hope of realising a capital
the economy gain.
Source: ABS and REIV 2014
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House prices across Australia, Melbourne Metropolitan, Clayton and Doncaster demonstrated
consistent trends and patterns from 2003 to 2013. House prices trended upward since 2003 and
reached a peak in 2008. During the GFC 2008 period, house prices in all observed locations fell from
2008 to middle of 2009 and staged a strong rebound from mid-2009 to mid-2010. House prices for
all locations fell during the period of mid-2011 to mid-2012, before staging another rebound at
beginning of 2013.
Claytons house prices increased the most during the assessment period. House prices in Clayton
increased by 120% comparing 2002 and 2013. Doncaster house prices came in second with an
increase of 110% and demonstrated the steepest uptrend from the period between mid-2012 to
end of 2013. Melbourne Metropolitan and Australian house prices had increased 60% and 40%
respectively. Figure 4.5 illustrates the price movements based on percentage movements in all
locations:
Figure 4.5: House Price Movements in Australia, Melbourne Metropolitan, Clayton and
Doncaster
15.00%
Australia MelMetro Clayton Doncaster
10.00%
5.00%
0.00%
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Nov-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Jul-03
Nov-03
Jul-04
Nov-04
Jul-05
Nov-05
Jul-06
Nov-06
Jul-07
Nov-07
Jul-08
Jul-09
Nov-09
Jul-10
Nov-10
Jul-11
Nov-11
Jul-12
Nov-12
Jul-13
Nov-13
-5.00%
Pre-GFC Period GFC Post GFC Stimulus Package 1: Economic Period of no stimulus
stimulus package worth AUD10.4 billion was package. Sovereign debt
announced and implemented in Dec 2008 crisis in Europe. Period of
-10.00% acceleration of mortgage
Post GFC Stimulus Package 2: Second, larger debt. Households opt to pay
economic stimulus package was announced off loans rather than pile on
by the Australian Goverment in Feb 2009 more debt in the hope of
with AUD47 billion allocated to help boost realising a capital gain.
the economy
Source: ABS & REIV 2014
Figure 4.5 illustrates house price fluctuation by comparing the percentage changes between two
consecutive quarters for all the property markets. The percentage changes demonstrated similar
118
patterns of volatility across all the localities. The Australian house prices were the least volatile and
Clayton house prices demonstrated the highest volatility. Doncaster and Melbourne Metropolitan
shared similar volatility subsequent to the period of 2009. All markets increased positively in the
three major interval periods of the assessment, namely 2005 to mid-2008(the GFC 2008), mid-2009
to end-2010 and end 2012 to end 2013.
GFC 2008 affected house prices negatively for a short period of time after 2008 for all locations. The
Australian Governments two Post GFC economic stimulus packages resulted in shorter downturn
periods for house prices as a result of the GFC 2008. In 2008, the Australian Government
implemented the first Stimulus package worth AUD10.4 billion. This package included payments to
seniors, carers and families. The payments were made in December 2008, just in time for Christmas
spending, and retailers predominantly reported stronger than anticipated sales. The first home
buyers grant was doubled to AUD14,000 for existing homes, and tripled to AUD21,000 for new
homes. A second, larger economic stimulus package, commonly known as Economic Stimulus
Package number two, was announced by the Australian Government in February 2009, with AUD47
billion allocated to help boost the economy (Canstar, 2014). This package included:
i. AUD14.7 billion for schools

ii. AUD6.6 billion for 20,000 new homes
iii. AUD3.9 billion to insulate 2.7 million homes
iv. AUD890 million for road repairs and infrastructure
v. AUD2.7 billion in small business tax breaks
vi. AUD12.7 billion for cash bonuses: AUD950 for every Australian taxpayer who was earning
less than AUD80,000 per annum, to be paid out in March and April 2009
The Australian Economic Stimulus packages helped lift house prices for a relatively short period of
time from 2009 to 2010. As shown in Figures 4.4 and 4.5, another downturn in house prices for all
locations occurred from the beginning of 2011 until the end of 2012. It was during this time that
some European countries were facing a Sovereign Debt Crisis. During the same period (2011 to
2012) there was no new Government stimulus packages subsequent to the two stimulus packages
implemented after GFC 2008. There was a severe loss of confidence by Australian households in the
residential property market (Canstar, 2014). Their caution levels increased as they opted to pay off
loans rather than accumulate more debt in the hope of realising a capital gain. This period was
called the acceleration of mortgage debt period in Australia (Zappone, 2011).
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The median house prices in the selected suburbs in which REIV provided the data sources,
demonstrated a trend and pattern consistent with the median house price performance for the
entire country; although not similar in magnitude. The residential property market performance in
the two selected suburbs exceeded the Melbourne Metropolitan and Australian housing market
performance. The consistency of house price trends, and the better performed house prices in the
selected locations have provided the much needed platform for the subsequent analysis of the
unknown drivers in Australian residential property market in recent time.
4.4. Melbourne Residential Property Market Performance Determinants
The Archer and Ling (1997) model provides a structural approach on property evaluation conducts
and enables systematic allocations of relevant economic and financial indicators into the defined
Space, Property and Capital markets. This model enables potential key local and overseas
determinants be assessed according to their critical relationship in property, space and capital
markets instead of merely relying on demand and supply analysis (Higgins, 2013). The adapted
Archer and Ling (1997) model, together with the push & pull model established in this study, were
used to build an economic model showing the best inter-relationship of separate economic variables
to house prices.
Part three of the quantitative research involved utilizing three key statistical tests to confirm the
validity of the model, namely Correlation matrix Pearson Correlation Coefficient (R) methodology,
Linear Stepwise Regression and Descriptive Analysis. The nature of the relationship between the
variables for determining the drivers of offshore investors buying activities in these suburbs was
primarily analysed using three primary datasets or 135 data points of house prices, namely house
prices in Melbourne Metropolitan, Clayton and Doncaster (DV); 15 datasets or 675 primary data
points of economic indicators (IV). The selected traditional economic indicators of acceptable
significance were re-entered using lagged data for eight (8) quarters or two (2) years which gave rise
to an additional 5,400 lagged data points. These were incorporated in the SPSS analysis for the
traditional economic indicators. The completion of this phase enables the analysis of 18 data sets
(and 6,210 data points) covering a period of 12 years for observation starting from first quarter of
2002 onwards. All data collected were smoothed using a 4-quarters or one year moving average to
avoid seasonal variation. Data analysis in this research covered data collected from 2002 to 2013
and the verification of the model was conducted based on actual median house prices in the second
quarter of 2014.
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4.4.1. Correlation matrix
This section aims to accomplish the following objective:
To explore the existence of a significant relationship between the economic indicators from
the respective Space, Capital and Property markets and the house prices in Melbourne
Metropolitan, Clayton and Doncaster.
Nagelkerke (1991) depicted the use of R (coefficient of determination), also called the multiple
correlation coefficients. It is well established in classical regression analysis. Its definition as the
proportion of variance 'explained' by the regression model makes it useful as a measure of
predicting the DVs from the IVs. SPSS software was used to compute the Pearson correlation
coefficients, r, along with the significance levels. As per the test criteria set in Chapter 3 - Research
Design and Methodology, this quantitative research phase shall establish if there is a significant
relationship between the economic indicators and Melbourne Metropolitan, Clayton and Doncaster
house prices. The operationalised hypothesis depicted that this study will reject the null hypothesis
if there is statistically significant correlation between the economic indicators with Melbourne
Metropolitan house prices. The strength and direction of the correlations between house price
performance in each and every location and significant influencing economic indicators are
identified for both current and lagged eight (8) quarters periods.
4.4.1.1. Metropolitan Melbourne Residential Property Market
Correlations were measured for the Melbourne Metropolitan house prices and the respective
economic indicators. The main leading economic indicators and their significant relationship with
house prices in Melbourne Metropolitan are summarized in Table 4.3:
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Table 4.3: Correlation of Leading Economic Indicators with Melbourne Metropolitan House
Prices
Melbourne Metropolitan Property Market

Traditional Determinants
Lag (Months)
Space Market Current 3 6 9 12 15 18 21 24
GDP per capita -0.22 -0.13 -0.28 -0.41 -0.46** -0.44 -0.32 -0.14 0.08
Total Employed Labor Force 0.47** 0.28 0.04 -0.91 -0.36* -0.37* -0.35* -0.30 -0.12
Population growth 0.33 0.44** 0.50** 0.51** 0.45** 0.35* 0.35* 0.24 0.12
Net Saving - Current Prices -0.26 -0.24 -0.06 0.19 0.22 0.14 0.20 0.16 0.10
Net Overseas Migration -0.51** -0.44** -0.26 -0.06 0.16 0.39* 0.36* 0.36* 0.30
Capital Market
10-year government bond yields 0.76** "0.65** 0.37* 0.05 -0.32 -0.41 -0.38* -0.27 -0.08
ASX 200 Index -0.01 0.30 0.34* 0.46** -0.18 -0.14 -0.27 -0.39* -0.37*
Exchange Rate 0.49** 0.46** 0.08 -0.21 -0.57** -0.70** -0.61** -0.48** -0.26
Mortgage Rates "0.45** -0.01 -0.38* -0.65** -0.65** -0.50** -0.26 -0.07 0.05
90-day bank bills 0.49** 0.06 -0.33 -0.62** -0.66** -0.55** -0.32 -0.11 0.04
Property Market
New Housing Supply 0.17 0.24 0.31 0.28 0.24 -0.06 -0.13 -0.33 -0.38*
Building Planning Approvals 0.67** 0.61** 0.42** 0.29 0.01 -0.15 -0.26 -0.28 -0.29
Rent Growth 0.12 0.09 0.10 0.14 0.17 0.18 0.20 0.16 0.14
House Price Index 0.89** 0.78** 0.49** 0.09 -0.24 -0.40 -0.42 -0.28 -0.13
Building Activity-Value of Building Work
done (Residential Vic) 0.23 0.13 0.00 -0.12 -0.17 -0.23 -0.28 -0.22 -0.17
** Correlation is significant at the 0.01 level (2-tailed) RED Most significantly correlated at the 0.01 level
* Correlation is significant at the 0.05 level (2-tailed) BLUE Signficantly correlated at the 0.01 level
GREEN Signficantly correlated at the 0.05 level
Table 4.3 provides the SPSS analysis results depicting the strength of the relationship between the
selected economic factors and house prices in the Melbourne Metropolitan property market for the
series of 2002-2013, illustrated by the respective r-values. All the leading economic indicators from
the respective Space, Capital and Property markets with their correlations readings (r) were
analysed and ranked in accordance with the strength of the correlations. The strength of the
correlations was depicted between the range of one (1) to negative one (-1), with a correlation
matrix closer to one having a stronger correlation and negative one depicting a strong inverse
relationship between the dependant and independent variable. These correlation readings (r) are
further broken down to (**) which depicts the correlation which are significant at the 0.01 level and
(*) depicting the correlations significant at the 0.05 level. Significant correlations between the
leading economic indicators and Melbourne Metropolitan house prices as r value were classified
according to the lagged periods are summarized in table 4.4 as:
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Table 4.4: Pearson Correlation coefficients, r-values and the Lagged Periods for Melbourne
A Pearson's Correlation was calculated to measure the strength of the linear relatioship between Melbourne
Metropolitan house prices and the below economic indicators.
Leading Indicators Market r Periods
The correlation is statistically significant, r 0, at the 0.01 level(2-tailed) with a 99% Confidence Intervel(CI):
1 House Price Index(ABS All Australia) Property Market 0.89 Current
2 10-year Government Bonds Yield Capital Market 0.76 Current
3 Exchange Rate Capital Market -0.70 15 months
4 Building Planning Approvals Property Market 0.67 Current
5 Mortgage Rate Capital Market -0.65 9 months
6 90-days Bank Bills Yield Capital Market -0.62 9 months
7 Population Growth Space Market 0.51 9 months
8 Net Overseas Migration Space Market -0.51 Current
9 Total Employed Labour Force Space Market 0.48 Current
10 GDP per Capita Space Market -0.46 12 months
11 ASX 200 Index Capital Market 0.46 9 months
12 New Housing Supply Property Market -0.38 24 months
The correlation is statisticaly insignificant in:

13 Building Activity-Value of Building Work
Done(Residential-Vic) Property Market -0.28 18 months
14 Net Saving - Current Prices Space Market -0.26 Current
15 Rent Growth Property Market 0.20 18 months
Embedded Logical Validation:
Based on the significance level depicted by the r-value, the National House Price Index had the
most significant correlation value of 0.89. In this study the National House Prince Index was used
as a benchmark to ensure data validity and not to be used as a determinant. The strong
correlation confirmed that the Melbourne Metropolitan house price data collected from REIV
were reflective and consistent with the ABS national house prices. Similar validation has been
applied in Clayton and Doncaster house prices in the subsequent sections.
Among the leading economic indicators, eleven (11) variables were statistically significant at the
0.01 level (2-tailed) deriving from Capital, Property and Space Markets respectively. 1 variable was
statistically significant at the 0.05 level (2-tailed) from Property Market and 3 variables were
statistically insignificant from Property and Space Markets.
Significant Relationships
Based on the result from Table 4.4, it can be seen that over the period of 2002 to 2013, there were
eleven (11) variables significantly correlated with the house price performance in Melbourne
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Metropolitan. Table 4.5 provides the ranking according to their significance level, or r-value as
below:
Table 4.5: R-value Rankings for Melbourne Metropolitan Housing Market
Leading Indicators r
1 10-year Government Bond Yield 0.76
2 Exchange Rate -0.70
3 Building Planning Approvals 0.67
4 Mortgage Rate -0.65
5 90-day Bank Bills Yield -0.62
6 Population Growth 0.51
7 Net Overseas Migration -0.51
8 Total Employed Labour Force 0.48
9 GDP per Capita -0.46
10 ASX 200 Index 0.46
11 New Housing Supply -0.38
As per table 4.5, 10-year Government Bond Yields and the Foreign Exchange rate were the two most
significant indicators in Pearson Correlation Analysis having each attained higher than 0.7 r-value
significance level. Building Planning Approvals, Mortgage rate and 90 day Bank Bills Yield achieved
above the 0.6 level, with Population Growth and Net Overseas Migration both demonstrating their
significant correlations by breaching above 0.5 levels. Notably there were six economic indicators
which demonstrated negative correlations with the house prices in Melbourne Metropolitan
namely: Foreign Exchange Rate; Mortgage Rate; 90-day Bank Bill Yield; Net Overseas Migration; GDP
per Capita; and New Housing Supply. Negative correlations depict that these indicators have inverse
relationships with house prices in Melbourne and their rationales were explained in Chapter Three
and Appendix I. Among the six negative indicators, Net Overseas Migration and GDP per Capita
demonstrated irregular relationships. They were expected to have positive correlations and move in
the same direction as the Melbourne house prices. These irregularities shall be assessed in later
sections with the analysis of Clayton and Doncaster sub-markets correlation reports and Stepwise
Regression analysis to allow a complete analysis result.
Insignificant Relationships
Table 4.4 highlighted that there were three variables that are insignificantly correlated with the
house prices in Melbourne Metropolitan, namely Building Activity-Value of Building Work Done in
Property Market, Net Saving in Space Market and Rent Growth rate in Property Market. According
to the statistical testing, these economic indicators had an insignificant impact or relationship with
the house price performance in Melbourne Metropolitan area. Notably the traditional leading
124
economic indicators such as Net Saving and Rent Growth in Property Market valuation exercises had
dropped from the listing and became insignificantly correlated with the house prices in Melbourne
Metropolitan.
4.4.1.2. Clayton Residential Property Market
The correlations analysis was repeated for the Clayton housing market. The leading economic
variables and the significance of their relationship with house prices in Clayton are tabulated as
follows in Table 4.6:
Table 4.6: Correlation of Leading Economic Indicators with Clayton House Prices
Clayton Property Market

Lag (Months)
A Space Market Current 3 6 9 12 15 18 21 24
1 GDP per capita 0.20 0.16 0.05 -0.08 -0.15 -0.12 10.00 0.21 0.39*
2 Total Employed Labor Force 0.43** 0.24 0.10 -0.03 -0.17 -0.19 -0.22 -0.15 0.06
3 Populations growth 0.26 0.31 0.32 0.28 0.19 0.07 -0.06 -0.18 -0.27
4 Net Saving - Current Prices 0.03 -0.09 0.09 0.13 0.30 0.01 0.09 0.25 -0.06
5 Net Overseas Migration -0.17 -0.06 0.19 0.40** 0.53** 0.57** 0.47** 0.32 0.25
B Capital Market
1 10-year bank bonds 0.64** 0.51** 0.29 0.00 -0.20 -0.26 -0.22 -0.13 0.10
2 ASX 200 Index 0.07 0.31 0.31 0.36* 0.23 -0.02 -0.18 -0.24 -0.20
3 Exchange Rate 0.29 0.29 0.00 -0.24 -0.42** -0.63** -0.51** -0.35* -0.04
4 Mortgage Rates 0.26 -0.08 -0.31 -0.48** -0.40** -0.22 -0.02 0.28 0.29
5 90-days bank bills 0.33 0.01 -0.26 -0.46** -0.43** -0.27 -0.05 0.19 0.31
C Property Market
1 New Housing Supply 0.19 0.18 0.15 0.12 -0.10 -0.23 -0.26 -0.43** -0.33
2 Building Planning Approvals 0.51** 0.33 0.17 0.01 -0.30 -0.28 -0.44** -0.38** -0.28
3 Rent Growth 0.08 -0.01 -0.03 -0.08 -0.12 -0.15 -0.22 -0.26 -0.31
4 House Price Index 0.84** 0.64** 0.31 -0.06 -0.35** -0.44** -0.39** -0.24 -0.11
Building Activity-Value of Building
5 Work done (Residential Vic) -0.02 -0.01 -0.33 -0.29 -0.44** -0.46** -0.40* -0.39* -0.26
Significant correlations at 0.01 level (2-tailied) are highlighted in bold (**) and bold (*) at 0.05
significance level are shown in Table 4.5 above. Only two traditional economic indicators from Space
market, namely Total Labour Employed Force and Net Overseas Migration were significantly
correlated. The majority of the significant correlated economic indicators were from Capital and
Property market highlighting the significance of Capital Market and Property Market driving the
house prices in Clayton. Table 4.7 shows the summary significant correlations between the leading
economic indicators and Clayton house prices as r-value:
125
Table 4.7: Pearson Correlation coefficients, r values and the Lagged Periods for Clayton
House Prices
A Pearson's Correlation was calculated to measure the strength of the linear relatioship between Clayton
house prices and the below economic indicators.
4 Net Overseas Migration Space Market 0.57 15 months
7 Building Activity-Value of Building Work Done(Residential-
Vic) Property Market -0.46 18 months
11 GDP per Capita Space Market 0.39 24 months

14 Net Saving - Current Prices Space Market 0.30 12 months
15 Rent Growth Property Market -0.22 18 months
Among the leading economic indicators, nine variables (excluding House Price Index) are statistically
significant at the 0.01 level (2-tailed) deriving from Capital, Property and Space Markets
respectively; compared to 11 significant variables in Melbourne Metropolitan market. Two variables
are statistically significant at the 0.05 level (2-tailed) from Property and Space Markets. Three
variables are statistically insignificant from Property and Space Markets.
From the analysis results of Table 4.7, there were 11 variables significantly correlated with the
house price performance in Clayton over the period from 2002 to 2013. Table 4.8 ranked the leading
economic indicators according to their significance level, or r-value, as below:
126
Table 4.8: R-value Rankings for Clayton Housing Market
1 House Price Index 0.84
2 10-year Government Bond Yields 0.64
4 Net Overseas Migration 0.57
7 Building Activity-Value of Building Work
Done(Residential-Vic) -0.46
11 GDP per Capita 0.39
12 ASX 200 Index 0.36
Similar to the Melbourne Metropolitan property market, 10-Year Government Bond Yields and the
Foreign Exchange Rate are again ranked highest achieving above 0.6 correlation strength or r-value.
Net Overseas Migration had emerged as the third most significantly correlated indicator in Clayton
property market. This is consistent with research findings in section 4.2.1 in this Chapter that
Clayton attracted the most overseas settlers in Victoria (ABS, 2014).
Notably, there are only five economic indicators which demonstrated negative correlations with the
house prices in Clayton, as compared to six in Melbourne Metropolitan residential property market.
These five negative correlated indicators were Foreign Exchange Rate, Mortgage Rate, Building
Activity, 90-day Bank Bill Yields, and New Housing Supply. Both Net Overseas Migration and GDP per
Capita were showing positive correlations instead of negative relationship as in Melbourne
Metropolitan property market. Negative relationships for rest of the five economic indicators with
the Clayton house prices are regular and logical.
Insignificant Relationships
Table 4.7 highlighted that there are three variables that were insignificantly correlated with the
house prices in Clayton. Similar to Melbourne Metropolitan property market, both Net Saving and
Rent Growth rate, which were anticipated as key economic indicator for property market
performance, were insignificantly correlated with the house prices in Clayton. Population growth
had also dropped to the insignificant correlation category for the Clayton housing market. According
to the statistical testing, these economic indicators had an insignificant impact or relationship with
the house price performance in Clayton area.
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4.4.1.3. Doncaster Residential Property Market
The same correlation analysis was performed on the Doncaster housing market and the leading
traditional economic variables and the significance of their relationship with house prices in
Doncaster are summarised as follow in Table 4.9:
Table 4.9: Correlation of Leading Economic Indicators with Doncaster House Prices
Doncaster Property Market

Lag (Months)
Current 3 6 9 12 15 18 21 24
Space Market
GDP pe capita 0.07 -0.04 -0.17 -0.26 -0.31 -0.26 -0.12 0.09 0.32
Total Employed Labor Force 0.45** 0.22 -0.08 -0.28 -0.37 -0.40 -0.27 -0.10 0.07
Populations growth 0.23 0.32 0.38* 0.36* 0.30 0.20 0.07 -0.05 -0.15
Net Saving - Current Prices 0.03 -0.17 0.06 0.16 0.16 -0.01 0.15 0.16 -0.01
Net Overseas Migration -0.27 -0.19 -0.07 -0.25 0.37* 0.45** 0.45** 0.33 0.32
Capital Market
10-year bank bonds 0.66** 0.47** 0.15 -0.20 -0.31 -0.32 -0.26 -0.18 -0.08
ASX 200 Index 0.23 0.46** 0.45** 0.27 0.09 -0.15 -0.38 -0.24 -0.13
Exchange Rate 0.45** 0.21 -0.15 -0.45** -0.65** -0.61** -0.50** -0.27 -0.07
Mortgage Rates 0.13 -0.21 -0.48** -0.55** -0.43** -0.29 -0.10 0.03 0.15
90-days bank bills 0.19 -0.15 -0.44** -0.55** -0.46** -0.33 -0.15 0.00 0.14
Property Market
New Housing Supply 0.16 0.24 0.29 0.08 0.01 -0.30 -0.40* -0.29 -0.25
Building Planning Approvals 0.54** 0.46** 0.25 -0.01 -0.22 -0.30 -0.39* -0.38 -0.32
Rent Growth 0.02 0.00 -0.03 -0.03 -0.03 -0.06 -0.05 -0.09 -0.10
House Price Index 0.84** 0.55** 0.18 -0.17 -0.37 -0.42 -0.37 -0.28 -0.19
Building Activity-Value of Building Work
done (Residential Vic) 0.13 -0.11 -0.22 -0.29 -0.39* -0.37* -0.46** -0.25 -0.20
Table 4.9 shows that Doncaster residential property market behaved similarly to Clayton housing
market with only Total Employed Labour Force and Net Overseas Migration from the Space market
proving significantly correlated. The selected suburbs seems to perform in a similar manner to
previously identified significant drivers such as net saving, population growth and income growth
(GDP per capita) which did not emerge as significantly correlated. In contrast, determinants that
closely associated with offshore investment such as Net Overseas Migration, 10-year bank bonds
and Foreign exchange rates had emerged as strong contenders in the correlation analysis. See Table
4.10 for the significant correlations between the leading economic indicators and Doncaster house
prices:
128
Table 4.10: Pearson Correlation Coefficients, r-values and the Lagged Periods for Doncaster
House Prices
A Pearson's Correlation was calculated to measure the strength of the linear relatioship between Doncaster
house prices and the below economic indicators.
7 Building Activity-Value of Building Work Done(Residential-Vic) Property Market -0.46 18 months

In a similar fashion to Claytons housing market, Table 4.10 shows that drivers closely associated
with offshore investments had emerged as strongly within the 11 most significant correlated
indicators, for example 10-year Government Bond Yields, Exchange Rate and Net Overseas
Migration. Two variables were statistically significant at the 0.05 level (2-tailed) namely New
Housing Supply and Population Growth. The most noteworthy finding from the correlation analysis
in both Clayton and Doncaster housing market is that previously significant determinants in
residential property market such as GDP per Capita, Net Saving and Rent Growth reduced their
influence.
Table 4.10 depicted the 12 most significantly correlated determinants with the house prices
performance in Doncaster over the period 2002 to 2013. Table 4.11 ranked them according to their
significance levels, or r-value:
129
Table 4.11: R-value Rankings for Doncaster Housing Market
1 House Price Index(ABS All Australia) 0.84
2 10-year Government Bond Yields 0.66
7 Building Activity-Value of Building Work Done(Residential-Vic) -0.46
8 ASX 200 Index 0.46
10 Net Overseas Migration 0.45
12 Population Growth 0.38
Table 4.11 showed that 10-Year Government Bond Yields and Foreign Exchange Rate emerged as
the highest ranked economic indicators in Doncaster residential property market. This is the same as
Melbourne Metropolitan and Clayton. Similar correlation pattern was observed in the three
property markets in this study consistently. Determinants that were closely associated with offshore
investment such as 10-year Government Bond Yield, Foreign Exchange Rate and Net Overseas
Migration had emerged as strong contenders as the key drivers in the housing market performance
at the expense of traditional drivers such as population growth, rent growth and population growth.
Two traditional indicators remained significantly correlated; Building Planning approvals and
Mortgage rate. The rationale and expected matrix outcomes for all the indicators are listed in
Appendix I.
4.4.2. Stepwise Regression
This section aims to accomplish the following objectives:
To explore and test the significant determinants of the various economic indicators from the
respective Space, Capital and Property markets have on the house prices in Melbourne
Metropolitan, Clayton and Doncaster and to formulate three predictive models using linear
regression equations for the three housing markets.
SPSS software was used to compute Linear Stepwise Regression to fit a linear regression line using
the ordinary least squares method. The idea of this method is to minimise the Sum of Squared
distances, S, for each variables pair from a fitted regression line. The regression line that minimises
the S-value is known as the Line of Best Fit. Linear regression also assumes that the relationship
between the predictor (House Prices) and dependant variables (indicators from Space, Capital and
Property Markets) is explained by a linear relationship. R-square (R) reflects the proportion of
130
variability in the dependant variables that can be explained by a linear relationship with the
predictor variable (house prices).A simple representation of the Line of Best Fit is as follow:
House Price Movement =
(Space datasets .-2)+ (Capital datasets .-2, ...)+ (Property datasets .-2...)
Three key statistical tests were used to confirm the validity of these models, namely
i. Coefficient of Multiple determination (R)
R reflects the proportion of variability in the dependent variable that can be explained by a linear
relationship with the predictor variables. The R measures the goodness of fit for linear regression.
The better the line fits the data, i.e. the closer the data point sits on the line, the higher R will be. If
there is no linear relationship between the predictor and the dependent variable, R = 0 or close to
it.
ii. Sig-value or p-value
If Sig-value or p < 0.001 and as the p-value is less than 0.05 level of significance, we reject H. There
is statistically significant evidence that the data fits a linear regression model.
iii. Statistical test for bias (t-test)
T-test is a measure to determine if there is no bias and the errors are normally, or nearly normally,
distributed. The "t'' statistic is computed by dividing the estimated value of the parameter by its
standard error. This statistic is a measure of the likelihood that the actual value of the parameter is
not zero. The larger the absolute value of t, the less likely that the actual value of the parameter
could be zero.
iv. Durbin Watson Statistics (DW)
This is a test to detect patterns in a series of errors. The "Durbin-Watson test for autocorrelation'' is
a statistical model that indicates the likelihood that the deviation (error) values for the regression
have a first-order autoregression component. The regression models assume that the error
deviations are uncorrelated. The Durbin-Watson Statistic is used to test for the presence of serial
correlation among the residuals (Durbin and Watson, 1950). As a general rule of thumb, the
residuals are uncorrelated if the Durbin-Watson statistic is approximately 2. A value close to 0
indicates strong positive correlation, while a value of 4 indicates strong negative correlation.
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The selected lagged economic variables were re-entered using all lagged data from three months to
2 years to establish the close fit otherwise erroneously eliminated due to timing difference between
the Dependant Variables and the Independent Variables
As per the test criteria set in the Chapter 3, Research Design and Methodology, the main objective
of this section is to establish if the economic indicators fit the linear regression model with house
prices in Melbourne Metropolitan, Clayton and Doncaster. The Linear Stepwise Regression model
between the house prices performance in each and every location and significant influencing
economic indicators are identified for both current and lagged eight (8) quarters period.
4.4.2.1. Melbourne Metropolitan Residential Property Market
The result of stepwise multiple regression analysis presents the complex interactions of the all the
leading economic variables in an effort to provide an acceptable econometric model representing
future house prices in Melbourne Metropolitan. The application of a stepwise multiple regression on
the lagged significant leading economic variables against the house prices in Melbourne
Metropolitan, taking off the comparison variable of House Price Index, is presented in Table 4.12:
Table 4.12: Single Equation Regression Model for Melbourne Metropolitan Residential
Property Market
Melbourne Metropolitan R = 91%

Variables in Model
Variables Description Lagged B-value Coefficient T-test Sig. DW test

1 10BondCurr 10-year Government Bond Yield Current 0.28 0.554 9.361 0
2 BuiltCurr Building Planning Approvals Current 0.16 0.315 5.144 0
3 Forex5 Foreign Currency Exchange 15 months -0.23 -0.312 -5.039 0
4 GDP6 GDP Growth 18 months -1.64 -0.195 -3.451 0.002 2.595
Multiple Linear Regression Equation =

2.39+0.28(10BondCurrent)+0.16(BuiltCurr)-0.23(Forex5)-1.64(GDP6)
The model Equation:
Melbourne Metropolitan House Prices =

2.39+0.28(10BondCurrent)+0.16(BuiltCurr)-0.23(Forex5)-1.64(GDP6)
The adequacy of the equation was reflected in the high R readings (91%) and the significant t-
values for each economic variable. Linear regression was established in the relationship between
Melbourne Metropolitan house prices (DV) and the indicators from Space, Capital and Property
132
Markets (IV) and weather the relationship could be explained by a linear, or straight line,
relationship. The IVs in the predictive model were consistent with the result of Pearson Correlation
analysis in Section 4.4.1 on Melbourne Metropolitan residential property market. Three
independent variables that demonstrated both the characteristics as the major determinants in
regression analysis and significantly correlated for the house prices in Melbourne Metropolitan are
listed in table 4.13:
Table 4.13: Significant Determinant in Melbourne Metropolitan
Determinants Period Markets B-Value Coefficient

1 10-year Current Capital 0.28 0.554
Government
Bond Yield
2 Building Current Property 0.16 0.315
Planning
Approvals
Foreign 15 months Capital -0.23 -0.312
3 Currency
Exchange
4 GDP Growth 18 months Space -1.64 -0.195
Figure 4.6 shows the graph plotted comparing the Melbourne Metropolitan house prices indices
calculated using the regression equation compared with the actual Melbourne Metropolitan house
price fluctuations:
Figure 4.6: Melbourne Metropolitan House Prices Calculated Based on Regression Equation
220.0
200.0
180.0
160.0
140.0
120.0
100.0
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Jun-09
Dec-11
Dec-09
Dec-10
Dec-12
Dec-13
Jun-14
Dec-14
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-10
Jun-11
Jun-12
Jun-13
Actual Index Model Prediction
133
To validate the calculated regression equation, the forecast house prices in Melbourne Metropolitan
were further compared with the recent house prices of Melbourne Metropolitan, as per REIV data
up to the second quarter of 2014 in Table 4.14 as below:
Table 4.14: Forecast Results for Second Quarter 2014
Melbourne Metropolitan House Price Index

Period Actual Model Prediction Difference
Jun-13 162.82 151.05 -7.23%
Sep-13 168.33 154.56 -8.18%
Dec-13 175.88 158.24 -10.03%
Mar-14 182.34 161.72 -11.31%
Jun-14 189.94 164.84 -13.21%
The forecasted house price indices for Melbourne Metropolitan using the regression equation
demonstrated a relatively lower increase for the 12 months assessment periods from December
2013 to December 2014. The Model prediction derived a 9.13% growth in the 12 month period
(from 151.05 to 164.84) and the actual index for house prices in Melbourne Metropolitan in 2014
showed 16.66% increase (162.80 to 189.90). There was a -13.21% difference when comparing the
actual index and the prediction on June 2014 data. This regression equation is considered inaccurate
in forecasting the residential property market performance in Melbourne Metropolitan until the
period ended June 2014 with more than 13% difference. The subsequent sections strive to derive a
more accurate model prediction by introducing non-traditional socio-economic factors.
The application of a stepwise multiple regression on the lagged significant leading economic
variables was repeated for Clayton to explore the manner of the interactions of the all the leading
economic indicators against the housing performance. An econometric model representing future
house prices in Clayton is presented in Table 4.15:
Table 4.15: Single Equation Regression Model for Clayton Residential Property Market
Clayton R = 93.8%

3 NOM3 Net Overseas Migration 9 months 0.352 0.572 6.005 0
4 Built$1 Building Activity-Residential Built($) 3 months 1.177 0.551 7.719 0
5 GDPCurrent GDP per Capita Current 6.585 0.35 5.918 0
6 Save1 Net Saving - Current Price 3 months -0.038 -0.206 -3.601 0.001
7 MRate3 Mortgage Rate 3 months -0.35 -0.343 -5.655 0
8 NewHse8 New Housing Supply 24 months 0.287 0.245 4.021 0
9 Forex7 Foreign Exchange 21 months -0.208 -0.156 -2.393 0.024 2.464

"-1.219+0.552(10BondCurr)+0.352(NOM3)+1.177(Built$1)+6.585(GDPCurr)-0.038(Save1)-0.35(MRate3)+0.287(NewHse8)-0.208(Forex7)
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The model Equation:
Clayton House Prices =

-1.219+0.552(10BondCurr)+0.352(NOM3)+1.177(Built$1)+6.585(GDPCurr)-0.038(Save1)-
0.35(MRate3)+0.287(NewHse8)-0.208(Forex7)
An econometric regression model was established for Clayton residential property market with a
relatively high R reading (93.8% range) and the significant t-values for each economic variable.
Similar to the previous section, the key drivers in this predictive model were compared with the
result of Pearson Correlation analysis in Section 4.4.1 on Clayton residential property market to
solicit consistency. Notably among the 11 significant correlated variables established in the
correlation analysis for Clayton market, seven of them had been fitted in this regression line. Table
4.16 below depicted three key determinants that emerged significant in both regression and
correlation analysis:
Table 4.16: Significant Determinants in Clayton
Determinants Periods Markets B-Value Coefficient

1 10 Year Government Current Capital Market 0.552 0.579
Bond Yields
2 Net Overseas 9 months Space Market 0.352 0.572

Migration
3 Building Activities($) 3 months Property 1.177 0.551
Residential Building Market
Figure 4.7 shows the graph comparing the Clayton house prices indices using using the regression
equation with the actual Clayton house prices fluctuations:
135
Figure 4.7: Clayton House Prices Calculated Based on Regression Equation
280.00
260.00
240.00
220.00
200.00
180.00
160.00
140.00
120.00
100.00
Apr-06
Dec-04
Apr-05
Dec-05
Dec-06
Apr-07
Dec-07
Apr-08
Dec-08
Apr-09
Dec-09
Apr-10
Dec-10
Apr-11
Dec-11
Apr-12
Dec-12
Apr-13
Dec-13
Apr-14
Aug-05
Aug-06
Aug-07
Aug-08
Aug-09
Aug-10
Aug-11
Aug-12
Aug-13
Actual Index Model Prediction
To validate the calculated regression equation, the forecast house prices in Clayton were compared
with the recent house prices of Clayton, as per REIV data up to the second quarter of 2014 in Table
4.17 as below:
Clayton House Price Index

Jun-13 214.99 206.78 -3.82%
Sep-13 230.16 218.59 -5.03%
Dec-13 241.61 233.32 -3.43%
Mar-14 257.29 236.67 -8.01%
Jun-14 266.99 248.25 -7.02%
There was a surge in Clayton actual house prices over the period of 12 months from June 2013
(214.99) to June 2014 (266.99) by 24.19% in the Clayton. The forecasted house price indices using
the regression equation had shown similar escalation although in a smaller quantum (20.05%
growth in 12 months).
The reading of the latest index for the second quarter in 2014 shows a difference of just slightly
above 5% of -7.02% compared to the actual house price index. The subsequent readings for this
series are believed to be lower in the prediction model. This regression equation for Clayton, based
on the traditional economic indicators, provides a relatively accurate forecast for the residential
property market performance in Clayton. The subsequent sections intend to establish a more
accurate forecasting model by incorporating the non-traditional social economic factors.
136
In the final regression analysis on traditional economic indicators, stepwise multiple regression
analysis is applied to Doncaster residential property market. Besides providing an analysis on the
interactions of the all the traditional economic indicators, the application regression modelling had
provided a predictive model presented in Table 4.18:
Table 4.18: Single Equation Regression Model for Doncaster Residential Property Market
Doncaster R = 83%

1 10BondCurr 10-year Government Bond Yield Current 0.160 0.221 2.024 0.052
2 ASX6 ASX 200 Index 18 months -0.129 -0.306 -3.231 0.003
3 Built$4 Building Activity-Residential Built($) 12 months -0.471 -0.296 -3.369 0.002
4 EmpCurr Employment Growth Current 5.994 0.5 4.617 0
6 Forex6 Exchange Rate 18 months -0.281 -0.278 -2.685 0.012 2.71

0.17+0.160(10BondCurr)-0.129(ASX6)-0.471(Built$4)+5.994(EmpCurr)-0.341(MRate1)-0.281(Forex6)
A linear regression line was successfully established with a relatively significant R reading (83%)
and the significant t-values for each economic variable identified. The significant independent
variables in Doncaster forecasting model are consistent with the result of Pearson Correlation
analysis in Section 4.4.1 on Doncaster residential property market with six of them fitting on the
regression line. Among the significant correlated economic indicators identified by the correlation
and regression analysis, three significant independent variables are identified and in Table 4.19
below:
Table 4.19: Significant Determinants in Doncaster
Determinants Periods Markets B-Value Coefficient

1 10 Year Current Capital Market 0.16 0.221
Government Bond
Yields
2 Employment Current Space Market 5.994 0.5
Growth
3 Mortgage Rate 3 months Capital Market -0.341 -0.443
Figure 4.8 shows the graph plotted comparing the Doncaster house prices indices using the
regression equation with the actual Doncaster house prices fluctuations. Actual median house prices
from March 2014 to December 2014 were included in this analysis to compare with the mode
prediction to validate if the model provides satisfactory forecasting into 2014:
137
Figure 4.8: Doncaster House Prices Calculated Based on Regression Equation
280.0
260.0
240.0
220.0
200.0
Actual Index
180.0
Model Prediction
160.0
140.0
120.0
100.0
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
The model developed fitted accurately and provides a similar trend for the housing index in
Doncaster when compared with the actual median house prices from 2002 to 2013. However as
represented in Figure 4.8, the model prediction did not provide an accurate projection subsequent
to 2013. To further validate the calculated regression equation, the forecast house prices in
Doncaster are compared with the recent house prices of Doncaster, as per REIV data up to the final
quarter of 2014 in Table 4.20 as below:
Doncaster House Price Index

Jun-13 211.6 208.99 -1.23%
Sep-13 217.6 216.10 -0.69%
Dec-13 228.0 225.47 -1.11%
Mar-14 234.4 227.78 -2.82%
Jun-14 239.9 228.50 -4.74%
There was a surge in Doncaster house prices over the period of 12 months from June 2013 to June
2014 by 13.36% (from 211.6 to 239.9) in the actual Doncaster house price index. The forecasted
house price indices for Doncaster using the regression equation demonstrated a lower increase for
the 12 months validation periods (9.34% growth in 12 months) compared to the actual house price
index in Doncaster. Due to the slower growth projected by the model, the gap between the actual
house price index and the model prediction was widening towards 2014 resulting in the bigger
138
difference in the second quarter 2014 of -4.74%. Based on the traditional economic indicators, the
model provides an accurate forecast for the residential property market performance in Doncaster
until 2013 but not for the later part of the data series in 2014.
4.4.3. Discussion
Across all the forecasting models established for the Melbourne Metropolitan, Clayton and
Doncaster residential property markets based on traditional economic indicators, factors associated
with offshore investments had emerged as the dominant determinants among the traditional
economic indicators. Factors closely associated with foreign investments such as 10-year
Government Bond Yields (10Bond) and Foreign Currency Exchange (Forex) consistently emerged as
the leading determinants across all the residential property markets under the assessment. Their
significance, highlighted by both high r-value (Correlation analysis) and b-value (Regression analysis)
overtook the importance of other local determinants such as Mortgage Rate (MRate) and Building
Activity on Residential Properties (Built$). Previously regarded as crucial residential property
determinants such as rent growth, GDP per capita, net saving, population growth appeared less
significant in their associations with the property market performance in all the property markets
under the assessment.
According to Bowe (2012), Australias second largest export is actually Australian Commonwealth
Government Bonds (ACGBs). In the 12 months through June 2012, Australia sold AUD58 billion
worth of ACGBs to foreign investors, which exceeds the AUD48 billion worth of coal exported and is
second only to the AUD85 billion of iron ore exports over the same period. As at June 2015, the
Australian Office of Financial Management (AOFM, 2015) reported that approximately 65.2% of the
Australian Government Securities (Treasury Bonds, Treasury Indexed Bonds, and Treasury Notes)
were in the hands of foreign investors. The substantial extent of Australias sovereign bond exports
contributed to the resilience of Australias currency without providing the same direct economic
benefits as its other large exports during the assessment period. Australias AAA/Aaa rating still has
a stable outlook. These foreign investors see Australia as offering an attractive opportunity when
compared to other developed markets globally. However, the performance of ACGBs was subjected
to adversity in recent times subsequent to the Australian dollars devaluation from the highest level
of USD 1.30 in 2014 to USD 0.75 in June 2015. Australian bonds still offer investors a positive real
return. However, for foreign investors to obtain this real return, the currency must remain
unhedged.
A recent development in Australian immigration policies has simultaneously impacted the ACGBs
performance. As mentioned in the first Chapter, the recent Business Innovation and Investment
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Provisional visa subclass 188 requires visa holders to own and manage a new or existing business in
Australia, or to invest in Australia. The Australian Government Department of Immigration and
Border Protection (DIBP, 2015) defines the four main streams of this visa as:
i. Business Innovation stream: for people with business skills who want to establish, develop
and manage a new or existing business in Australia. Applicants must be nominated by a
state or territory government.
ii. Investor stream: for people who want to make a designated investment of at least
AUD1.5million in an Australian state or territory and maintain business and investment
activity in Australia. Applicants must be nominated by a state or territory government.
iii. Significant Investor stream: for people who are willing to invest at least AUD5million into
complying significant investments in Australia and want to maintain business and
investment activity in Australia. Applicants can be nominated by a state or territory
government or Austrade on behalf of the Australian government.
iv. Premium Investor stream: for people who are willing to invest at least AUD15million into
complying premium investments in Australia and want to maintain business and investment
activity in Australia. Applicants must be nominated by Austrade on behalf of the Australian
government.
Source: DIBP 2015
All visa holders are required to invest substantial amounts, varying from AUD1.5 million to AUD5
million, into a designated investment in a State or Territory Government security using
unencumbered funds accumulated from qualifying businesses or eligible investments and be
prepared to hold that investment for at least four years from date of issue in their nominating state
or territory. Although the investor schemes were relatively new immigration policies, it is believed
that the migration visa requirement would have partly contributed to the Bond market favourable
performance.
The significant negatively correlated relationship between the Foreign Exchange Rate (Forex) and
the Melbourne residential property market is consistent with the overseas investment stratagem in
which Australian assets became more economically to acquire when the Australian dollar is
devalued against other foreign currencies and particularly relevant to holding long terms assets in
Australia such as property. It is noteworthy that Net Overseas Migration (NOM) emerged as
significant in Clayton, consistent with the survey conducted by ABS (2014) that Clayton attracted the
largest number of overseas migrant settlements in Victoria.
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4.5. Melbourne Residential Property Market Performance Non-traditional Determinants
Section 4.4 presented the major determinants for the housing market in Melbourne Metropolitan,
Clayton and Doncaster. It was established that traditional economic indicators closely associated
with foreign investments in Australia were ranked significantly higher than the traditional economic
indicators in both the correlation matrix and regression analysis. Alongside the evaluation of
traditional determinants, two non-traditional determinants from Space Market, namely
International Student Enrolments (Education) and Overseas Visitors to Australia (Residential
Tourism) were introduced into this section. Besides statistically exploring the significance of these
new emerging determinants discovered in the literature review, the interactions between the two
new factors with the existing traditional economic indicators are analysed in this section. In
summary, this study intends to explore the significance of two non-traditional social economic
factors that had potentially played a role in driving offshore investors to invest in Australian
residential property beside all the traditional determinants illustrated in Section 4.4.
4.5.1. Correlation Matrix Including Non-traditional Determinants

4.5.1.1. Education International Student Enrolments
Correlations were measured for Melbourne Metropolitan, Clayton and Doncaster house prices and
the Victorian overseas student enrolment data for all sectors (schools, Vocational Education, Higher
Education and English Language Intensive Courses for Overseas Students (ELICOS)). The variable of
International Student Enrolments, herein after depicted as Education, and the significance of its
relationship with house prices in Melbourne Metropolitan, Clayton and Doncaster are summarized
in table 4.21:
Table 4.21: Correlation of Foreign Student Enrolments with Melbourne Metropolitan, Clayton
and Doncaster House Prices
Lag (Months)
Current 3 6 9 12 15 18 21 24
Melbourne Metropolitan 0.25 0.34* 0.39* 0.37* 0.32 0.23 0.16 0.07 -0.01
Clayton 0.51** 0.50** 0.46** 0.39* 0.25 0.13 -0.02 -0.12 -0.16
Doncaster 0.39** 0.42** 0.41** 0.31 0.22 0.09 0.01 -0.02 -0.12
Table 4.21 shows the summary analysis of Education in Australia. Education was significantly
correlated with house prices in Melbourne Metropolitan, Clayton and Doncaster residential
property markets for the series of 2002-2013. Significant correlations between Education in Victoria
141
and house prices as r-values are further classified according to the lagged periods as listed in Table
4.22 below:
Table 4.22: International Student Enrolment Pearson Correlation coefficients, r values and the
Lagged Periods Analysis
Foreign Student Enrolments - Victoria Market r Periods
Correlation is significant at the 0.01 level (2-tailed)

1 Clayton Non-traditioanl 0.51 Current
2 Doncaster Non-traditioanl 0.42 3 months
Correlation is significant at the 0.05 level (2-tailed)

1 Melbourne Metropolitan Non-traditioanal 0.39 6 months
Table 4.22 depicts that there is statistically significant correlations between Education and all the
property markets tested. Foreign student enrolment in Victoria was statistically significant at the
0.01 level (2-tailed) with the house prices in both Clayton and Doncaster and 0.05 level (2-tailed)
with the house prices in Melbourne Metropolitan. In summary, Education was statistically
significantly correlated to all the property markets in these three locations. Table 4.23 to 4.25
illustrate the rank analysis of Education comparing correlation significance (r-value) with the
traditional economic indicators in Melbourne Metropolitan, Clayton and Doncaster:
Table 4.23: Foreign Student Enrolments Ranking According to r-value in Melbourne Metropolitan
1 House Price Index Property Market 0.89 Current
12 Foreign Student Enrolments Non-traditional 0.39 6 months

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Table 4.24: Foreign Student Enrolments Ranking According to r-value in Clayton
5 Foreign Student Enrolments Non-traditioanl 0.51 Current

Table 4.25: Foreign Student Enrolments Ranking According to r-value in Doncaster
11 Foreign Student Enrolments Non-traditioanl 0.42 3 months

The ranking analysis in Tables 4.23 to 4.25 demonstrates the strength of correlations of Education
compared to other traditional economic indicators. Education, as a significantly correlated indicator
with house prices in Melbourne Metropolitan, comes in at 12th place after Net Overseas Migration
and above 13th placed New Housing Supply. In the Clayton housing market, Education ranked even
higher and shared the same fifth ranking with Building Planning Approvals. Simultaneously,
143
Education ranked 11th when compared to other traditional significant correlated economic
indicators in the Doncaster housing market.
Education in the Clayton residential property market ranked the highest among the three property
markets in terms of the significance level, with a r-value of 0.507 and strongly correlated for the
current period. Monash University and the John Monash Science School are both located in Clayton.
According to ABS (2014), suburbs incorporating or situated near universities featured high
proportions of migrants. These include suburbs like Clayton (70%) in Melbourne, Robertson (62%) in
Brisbane, Bentley and Crawley (both 62%) in Perth, Bedford Park (49%) in Adelaide, and Acton (57%)
in Canberra. Monash University had continued its rise in the international university rankings,
according to results released by Times Higher Education (Williams, 2015). In 2014 the University had
achieved a ranking of 83, representing an improvement of eight places since 2013. The total number
of international students enrolled in Monash University stands at 23,778 or 36.5% of the 65,006
student enrolment in 2014 (University, 2014). John Monash Science School is the State's first
specialist science secondary school and is a state government coeducational specialist selective
school in Victoria.
4.5.1.2. Residential Tourism
The objective of this section is to explore if the Overseas Tourist Arrivals in Australia resulted in
increased offshore investments in residential property in Australia. Correlations were measured for
Melbourne Metropolitan, Clayton and Doncaster house prices and Tourist Arrivals in Australia. As
per Chapter Three, this incorporated the analysis of three types of Overseas Arrivals data aimed at
to providing a better understanding of the significance level for each data set and eventually a
better comparative assessment. Among these three Overseas Arrivals statistics, the indicator that
demonstrates the strongest r-value relationship with the house prices of Melbourne Metropolitan,
Clayton and Doncaster will be selected to form part of the final analysis with the other leading
economic indicators. These three data sets of Overseas Arrivals that were incorporated in the
analysis are:
i. Long-term visitor arrivals (LTVA) - Overseas visitors who state that they intend to stay in
Australia for 12 months or more (but not permanently).
ii. Short-term visitor arrivals (STVA) - Overseas visitors who intend to stay in Australia for less
than 12 months.
iii. Short-term visitor arrivals in Victoria (STVAV) overseas visitors who had chosen to stay in
Victoria state for the longest duration of their time in Australia
144
Source: ABS 2014
Data collection and classification of Long Term Visitors (LTVA) and Short Term Visitors (STVA and
STVAV) data are mutually exclusive and distinctive in ABSs database. However STVA and STVAV
were under the same dataset group and not mutually exclusive. As such, only one of the two (STVA
or STVAV) was used as a potential factor for Melbourne Metropolitan, Clayton and Doncaster
markets analysis. The DVs listed above and the significance of their relationship with house prices in
Melbourne Metropolitan, Clayton and Doncaster are summarized as follow in table 4.26:
Table 4.26: Correlations between House Prices and Overseas Visitor Arrivals
Melbourne Metropolitan
Lag (Months)
Current 3 6 9 12 15 18 21 24
Long Term Visitor Arrivals -0.47** -0.36* -0.25 -0.03 0.18 0.36* 0.40* 0.47** 0.44**
Short Term Visitor Arrivals 0.22 0.11 0.01 -0.14 -0.22 -0.34* -0.30 -0.26 -0.20
Short Term Visitor Arrivals - Victoria 0.44** 0.46** 0.28 -0.06 -0.21 -0.35* -0.31 -0.29 -0.21
Clayton
Lag (Months)
Current 3 6 9 12 15 18 21 24
Long Term Visitor Arrivals -0.13 0.02 0.14 0.28 0.44** 0.44** 0.39* 0.27 0.26
Short Term Visitor Arrivals 0.06 -0.03 0.07 -0.17 -0.15 -0.21 -0.14 -0.07 0.00
Short Term Visitor Arrivals - Victoria 0.20 0.10 0.01 -0.17 -0.33 -0.32 -0.26 -0.19 -0.17
Doncaster
Lag (Months)
Current 3 6 9 12 15 18 21 24
Long Term Visitor Arrivals -0.22 -0.14 0.01 0.14 0.26 0.38* 0.39* 0.39* 0.45**
Short Term Visitor Arrivals 0.16 0.17 0.01 -0.13 -0.23 -0.34* -0.34* -0.22 0.00
Short Term Visitor Arrivals - Victoria 0.33* 0.27 0.14 -0.13 -0.29 -0.33* -0.37* -0.32 -0.26
Table 4.26 shows the summary outcomes for the correlation analysis for the three different
Overseas Arrivals data sets and the results are as follow:
i. Long Term Visitor Arrivals (LTVA) demonstrates significant positive correlations (at 0.01
level (2-tailed)) with house prices in all the residential property markets in this study for the
series of 2002-2013. The strength of correlation was the highest towards the latter part of
the time series in month 21 (Melbourne Metropolitan), month 15 (Clayton) and month 24
(Doncaster).
ii. Short Term Visitor Arrivals (STVA) demonstrates much weaker and negative correlation
with house prices in all markets. Only 0.05 level (2-tailed) significance level for Melbourne
Metropolitan and Doncaster residential property markets
iii. Short Term Visitor Arrivals in Victoria State (STVAV) demonstrates significant positive
correlations attained the 0.01 (2-tailed) significance level with Melbourne Metropolitan
145
house prices and 0.05 level (2-tailed) with Doncaster house prices. The strength of
correlation was the highest at the beginning of the time series, occurring in the third month
for Melbourne Metropolitan and current month for Doncaster residential property market.
Table 4.26 depicted that statistically significant correlations existed between the Visitor Arrivals
(Residential Tourism), a non-traditional socio-economic indicator and all the property markets
tested. Both LVTA and STVAV are statistically significant at the 0.01 level (2-tailed) with house prices
in all Melbourne Metropolitan. LVTA is statistically significant at 0.01 level and STVAV is less
significant fetching 0.05 level (2-tailed) in Doncasters residential property market. In the residential
property market in Clayton, only LVTA is statistically significantly correlated to residential property
prices. Table 4.27 to 4.29 provide the snap shot of the analyses for both LVTA and STVAV in terms of
correlation significance (r-value) with the housing markets in Melbourne Metropolitan, Clayton and
Doncaster conducted on top of the rank analysis of Education as presented in Table 4.23 to Table
4.25:
Table 4.27: Tourist Arrivals Ranking According to r-value in Melbourne Metropolitan
1 House Price Index** Property Market 0.887 Current
10 Long Term Visitor Arrivals Non-traditional 0.474 21 months
11 Short Term Visitor Arrivals - Victoria Non-traditional 0.463 3 months
14 Foreign Student Enrolments Non-traditional 0.390 6 months

146
Table 4.28: Tourist Arrivals Ranking According to r-value in Clayton
6 Foreign Student Enrolments Non-traditioanl 0.507 Current
12 Long Term Visitor Arrivals Non-traditioanl 0.427 12 months

Table 4.29: Tourist Arrivals Ranking According to r-value in Doncaster
11 Long Term Visitor Arrivals Non-traditioanl 0.448 24 months
12 Foreign Student Enrolments Non-traditioanl 0.423 3 months
15 Short Term Visitor Arrivals - Victoria Non-traditional 0.330 Current

LTVA was statistically significantly correlated in all the property markets in Melbourne Metropolitan,
Clayton and Doncaster at the 0.01 level and none fell below the 0.05 significance level; confirming
147
LTVA was a relatively strong emerging indicator in all property markets. STVAV demonstrated a
strong correlation with the house prices in Melbourne Metropolitan, Doncaster but not in Clayton.
The ranking analysis also demonstrated the strength of the relationships for both LTVA and STVAV
compared to other traditional economic indicators. LTVA as a significantly correlated indicator with
house prices in Melbourne Metropolitan came in at 10th place and STVAV came in at 11th position
after Total Employed Labour Force and above 14th placed Education. However, LTVA ranked lower
than fifth place Education and fourth place Net Overseas Migration in terms of r-value or
significance level In the Clayton housing market. In the Doncaster residential property market, LTVA
came neck and neck with Education at 11th position and STVAV ranked in a relatively lowly 15th
position in terms of correlation significance.
4.5.2. Stepwise Regression Including Non-traditional Determinants
This section aims to determine the significant relationships and interactions between the predictors
comprising of traditional and non-traditional indicators (Education and Residential Tourism) with
house prices in Melbourne Metropolitan, Clayton and Doncaster by using Stepwise Regression
analysis. All the traditional and non-traditional economic indicators in Space, Capital and Property
markets are built into this regression model to fit a linear regression line using ordinary least squares
method.
In Section 4.4.2.1.Melbourne Metropolitan Residential Property Market Analysis, stepwise multiple

regression analysis was performed to provide an acceptable econometric model predicting future
house prices in Melbourne Metropolitan based on the interactions between the leading economic
variables. In this section two additional indicators are added, namely Education and Residential
Tourism (LTAV and STVAV) into the modelling. Similar methodologies shall be applied with the
application of a stepwise multiple regression on the lagged variables against the house prices in
Melbourne Metropolitan. The result of the stepwise multiple regression analysis is presented in
table 4.30:
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Table 4.30: Single Equation Regression Model for Melbourne Metropolitan Residential
Property Market with Non-traditional factors
Melbourne Metropolitan R = 92%

1 10BondCurr 10-year Government Bond Yield Current 0.28 0.55 9.20 0.00 2.595
2 BuiltCurr Building Plannings Approval Current 0.17 0.33 5.11 0.00
3 Forex5 Foreign Currency Exchange 15 months -0.22 -0.31 -4.81 0.00
4 GDP6 Population Growth 18 months -1.29 -0.15 -1.84 0.08
5 STVAV2 Short Term Visitor Arrival (Vic) 6 months 0.58 0.05 0.68 0.50

2.18+0.28(10BondCurrent)+0.17(BuiltCurr)-0.22(Forex5)-1.26(GDP6)+0.09(STVAV2)
The Model Equation:
House Prices in Melbourne Metropolitan =

2.18+0.28(10BondCurrent)+0.17(BuiltCurr)-0.22(Forex5)-1.26(GDP6)+0.09(STVAV2)
The adequacy of the equations was reflected in the high R readings (92% range) and the
significant t-values for each economic variable. There was a small improvement in the R of this
model with non-traditional factors of Residential Tourism (RT) indicating a better single regression
line was fitted. As per Table 4.30, RT represented by STVAV2 was fitted as one of the determinants
in this latest forecasting model. The R had improved from 91% in the earlier regression model
(without the Residential Tourism) to 92% in the latest forecasting model. Figure 4.9 shows the graph
based on Melbourne Metropolitans actual house prices index compared to the forecasting models
index with and without the non-traditional factor of RT:
Figure 4.9 Comparison - Melbourne Metropolitan Actual House Prices and Two Regression
Forecasting Models
190
180
170
160
150
140
130
120
110
100
Jun-12
Jun-04
Oct-04
Jun-05
Oct-05
Jun-06
Oct-06
Jun-07
Oct-07
Feb-08
Jun-08
Oct-08
Jun-09
Oct-09
Jun-10
Oct-10
Jun-11
Oct-11
Oct-12
Jun-13
Oct-13
Feb-05
Feb-06
Feb-07
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Actual Index Model Prediction(Without RT) Model Prediction(with RT)
149
Figure 4.9 exhibits the impact after the regression model incorporated the non-traditional factor
Residential Tourism. The effect of Residential Tourism as a new determinant of house prices in
Melbourne Metropolitan improved the accuracy of the fitted regression line. The improved accuracy
was particularly noticeable towards the latter part of the data series. The new fitted line with the
Residential Tourism element moved the fitted line closer to the actual Melbourne Metropolitan
house price Indices starting from year 2013 till the end of the time series. The house price surge
observed in Melbourne Metropolitan towards the latter part of the time series, which was unable to
be modelled relying on traditional economic indicators, can be partly explained in this new equation
by incorporating the impact of Residential Tourism. In summary, this model provided a better
equation result as reflected in the higher R readings and validated with the latest forecast results
in 2014. The model was validated with the actual house prices until June 2014 as tabulated in Table
4.31:
Table 4.31: Model Validation For Melbourne Metropolitan Property Market with Residential
Tourism

Jun-13 162.82 166.70 2.38%
Sep-13 168.33 171.90 2.13%
Dec-13 175.88 176.83 0.54%
Mar-14 182.34 182.83 0.27%
Jun-14 189.94 187.79 -1.13%
As presented in Table 4.31, the forecasted house price indices for Melbourne Metropolitan using the
latest regression equation demonstrated a relatively lower growth rate for the 12 month
assessment periods from June 2013 to June 2014 compared to the actual Melbourne house price
indexes. The model predicted a 9.68% growth (from 166.70 to 187.79) while the actual index for
house prices in Melbourne Metropolitan grew approximately 12.00% (162.82 to 189.94) for the 12
month period. However, the difference between the actual index and the model prediction was less
than 2% for the entire 12 month period. The latest regression model has provided a more accurate
forecast compared to the model developed earlier without the Residential Tourism variable.
Similar to the previous section, two additional indicators were added, namely Education and
Residential Tourism to analyse the Clayton housing market response to these emerging
determinants. The same methodologies were applied with the application of a stepwise multiple
regression on the lagged variables against the house prices in Clayton. The result of the stepwise
multiple regression analysis is presented in Table 4.32:
150
Table 4.32: Single Equation Regression Model for Clayton Residential Property Market with
Clayton R = 95%

3 NOM3 Net Overseas Migration 9 months 0.344 0.505 5.578 0
4 Built$1 Building Activity-Residential Built($) 3 months 1.067 0.515 7.761 0
5 GDPCurrent GDP pe Capita Current 7.131 0.383 6.925 0
6 Save1 Net Saving - Current Price 3 months -0.053 -0.277 -4.697 0
8 NewHse8 New Housing Supply 24 months 0.313 0.266 4.76 0
9 Forex7 Foreign Exchange 21 months -0.430 -0.273 -3.643 0.001
10 LTVA2 Long Term Visitor Arrival 6 months 0.508 0.259 2.547 0.017 2.464

"-1.805+0.514(10BondCurr)+0.344(NOM3)+1.067(Built$1)+7.131(GDPCurr)-0.053(Save1)-0.455(MRate3)+0.313(NewHse8)-0.43(Forex7)+0.508(LTVA2)
The Model Equation:
Clayton House Prices=

-1.805+0.514(10BondCurr)+0.344(NOM3)+1.067(Built$1)+7.131(GDPCurr)-0.053(Save1)-
0.455(MRate3)+0.313(NewHse8)-0.43(Forex7)+0.508(LTVA2)
The adequacy of the equation is reflected in the high R readings (95% range) and the significant t-
values for each economic variable. An improved regression equation was enabled in the latest
predictive model having the R reading increase from 94% to 95% compared to the model with
only the traditional economic indicators. Although the non-traditional socio-economic factor of
Education was reflected as a strongly correlated factor in the correlation analysis, it was not
included in the latest forecasting model. Residential Tourism was included in this latest equation
reflected as LTVA2 (Long Term Visitor Arrival, lagged six months). Figure 4.10 illustrates Claytons
actual house price index compared to the forecasting models index with and without the non-
traditional factor of RT:
151
Figure 4.10: Comparison - Clayton Actual House Prices and Two Regression Forecasting Models
280.00
260.00
240.00
220.00
200.00
180.00
160.00
140.00
120.00
100.00
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Apr-10
Dec-10
Dec-11
Dec-12
Dec-13
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-11
Apr-12
Apr-13
Aug-05
Aug-06
Aug-07
Aug-08
Aug-09
Aug-10
Aug-11
Aug-12
Aug-13
Actual Model Prediction Model Prediction(with RT)
The latest forecasting model with the incorporation of RT as a variable was well fitted. The models
forecasted house prices showed a close resemblance to the actual house prices in Clayton until the
end of the analysis period in December 2013. Comparison was made to the forecasting model
developed without RT. The regression equation that included RT has provided a better prediction
compared to the model developed without RT. Not only did the R readings improve from 93.8%
to 94.8%, the effect of RT as a new determinant of house prices in Clayton improved the accuracy of
the fitted regression line in a significant manner. The house price surge observed in Clayton towards
the latter part of the time series which could not be modelled relying on traditional economic
indicators could be explained in this new equation after RT was included.
To validate the calculated regression equation, the forecasted house prices in Clayton were
compared with the recent actual house prices of Clayton up to the final quarter of 2014 as Table
4.33 below demonstrates:
Table 4.33: Model Validation For Clayton Property Market with Residential Tourism

Jun-13 214.99 216.74 0.81%
Sep-13 230.16 230.97 0.35%
Dec-13 241.61 240.44 -0.48%
Mar-14 257.29 244.85 -4.83%
Jun-14 266.99 249.42 -6.58%
The latest regression model of house price indices from 2002 to 2013 provides an accurate forecast
compared to the model developed earlier without the RT. The forecasted house price indices for
Clayton using the regression equation demonstrated a relatively slower increase for 12 month
152
periods from June 2013 to June 2014. The model predicted a 15.08% growth and the actual index
escalated by 24.19% for the same period of time. House price index in Clayton in June 2014 was
266.99 while the model forecasted 249.42, representing a -6.58% deficit. Although the actual house
prices in Clayton grew faster than forecasted, the difference between the actual index and the
model prediction was less than 10% for the entire 12 month period.
In section 4.4.2.2, a Submarket Analysis stepwise multiple regression analysis was performed to
explore the interactions of the traditional economic variables to provide an acceptable econometric
model to predict future house prices in Doncaster. In this section, two additional indicators, namely
Education and Residential Tourism, are added to explore their interactions with the traditional
economic indicators. The same methodologies were applied with lagged variables against house
prices in Doncaster excluding the comparison variable of House Price Index. The result of the
stepwise multiple regression analysis is presented in Table 4.34:
Table 4.34: Single Equation Regression Model for Doncaster Residential Property Market with
Doncaster R = 83%

1 10BondCurr 10-year Government Bond Yield Current 0.15 0.208 1.875 0.071
2 ASX6 ASX 200 Index 18 months -0.17 -0.398 -4.791 0
3 Built$4 Building Activity-Residential Built($) 12 months -0.67 -0.419 -4.909 0
4 EmpCurr Employment Growth Current 6.40 0.534 4.817 0
5 MRate1 Mortgage Rate 3 months -0.24 -0.318 -3.299 0.003
6 STVAVCurr Short Term Visitor Arrivals (Vic) Current 0.56 0.234 2.726 0.011 2.71

=-0.7+0.15(10BondCurr)-0.17(ASX6)-0.67(Built$4)+6.40(EmpCurr)-0.24(MRate1)+0.56(STVAVCurr)
The Model Equation:
Doncaster House Prices=

=-0.7+0.15(10BondCurr)-0.17(ASX6)-0.67(Built$4)+6.40(EmpCurr)-0.24(MRate1)+0.56(STVAVCurr)
As per Table 4.34, the regression equation was well fitted due to the incorporation of two new
variables, namely Residential Tourism (STVAVCurr) and Mortgage Rate (MRate). The adequacy of
the equation is reflected in the high R readings (83% range) and the significant t-values for each
economic variable. The R value remained the same at 83% in both models. Figure 4.11 exhibits
the visual representation of the improved predictive results comparing the three regression models;
namely the model with the traditional leading economic indicators, the model incorporating the
non-traditional factor, RT and the actual Doncaster house price index:
153
Figure 4.11: Comparison - Doncaster Actual House Prices and Two Regression Forecasting
Models
260.0
240.0
220.0
200.0
180.0
160.0
140.0
120.0
100.0
Jun-12
Jun-04
Oct-04
Jun-05
Oct-05
Feb-06
Jun-06
Oct-06
Jun-07
Oct-07
Jun-08
Oct-08
Jun-09
Oct-09
Jun-10
Oct-10
Jun-11
Oct-11
Oct-12
Jun-13
Oct-13
Jun-14
Feb-05
Feb-07
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Actual Index Model Prediction (without RT) Model Prediction(with RT)
Figure 4.11 shows the forecasting model without the non-traditional factors compared to the latest
model with the traditional model. The model that incorporated RT as a determinant has provided
much better forecasting results. The effect of RT, as a new determinant of house prices in
Doncaster, improved marginally the accuracy of the fitted regression line and its significance was
particularly noticeable towards the latter path of the data series. The new fitted line with the RT
element moved the fitted line closer to the actual Doncaster house price indices starting from year
2012 until the end of the time series. The house price surge observed in Doncaster towards the
latter part of the time series, which was unable to be modeled relying on traditional economic
indicators, was better explained in this new equation by incorporating the new determinant of RT.
To validate the accuracy of the new regression equation, the forecasted Doncaster house prices
were compared with the actual house prices of Doncaster in 2014 in Table 4.35 as below:
Table 4.35: Forecast Results for the Five Quarters until June 2014 - Doncaster

Jun-13 211.6 207.41 -1.98%
Sep-13 217.6 215.86 -0.80%
Dec-13 228.0 224.50 -1.54%
Mar-14 234.4 229.35 -2.15%
Jun-14 239.9 232.96 -2.88%
The forecasting model had accurately predicted house prices in Doncaster until June 2014. The
difference between the predicted and actual house prices was less than 3% for all the quarters in
154
comparison. The forecasted house price index for Doncaster in June 2014 shows a small difference
of 2.88% less than the Actual Index. In fact, the predicted average Index growth rates were almost
identical with the actual indices for the 12 months assessment periods from June 2013 to June 2014.
The model predicted a 12.32% growth (207.41 to 232.96) in the 12 month period versus the actual
reading of 13.36% (211.6 to 239.9) increase for the same period of time.
4.5.3. Discussion
Education
A Pearson Correlation Coefficient analysis was performed to explore if International Student

Enrolment (Education) was statistically significantly correlated to house prices in Melbourne
Metropolitan, Clayton and Doncaster. A new non-traditional indicator, International Student
Enrolments in Victoria was introduced to establish if this factor had potentially assisted in driving
overseas investments in Australias residential property markets. The significance of this new
determinant was further tested using Stepwise Multiple Linear Regression analysis to establish if the
relationship between the predictor (Education) and the house prices (dependent variable) was
explained by a linear relationship. The result of Stepwise Multiple Linear Regression analysis
presents the interaction of Education, as a new determinant, with all other leading economic
indicators in provision of an acceptable model representing future house prices in Melbourne
Correlation analysis revealed that there were statistically significant relationships between
Education and house prices in Melbourne Metropolitan, Clayton and Doncaster residential property
markets from 2002 to 2013. Significant correlations between Education and house prices as r-value
were classified accordingly in Figure 4.15.
Education was statistically significant at the 0.01 level with house prices in both Clayton and
Doncaster and at 0.05 level (2-tailed) with the house prices in Melbourne Metropolitan. Education
was ranked alongside all the identified traditional factors. It was ranked at 12th place after Net
Overseas Migration and above 13th placed New Housing Supply in Melbourne Metropolitan. In
Clayton, Education ranked even higher and shared the same fifth ranking with Building Planning
Approvals in terms of significance level. Education ranked 11th in Doncaster housing market. The
high ranking of Education as a determinant in Clayton was due to the presence of Monash University
and John Monash Science School in Clayton (ABS, 2014). According to ABS (2014), suburbs
incorporating or situated near universities featured high proportions of migrants.
155
The Stepwise Multiple Linear Regression analysis provided three adequately fitted regression lines
that possess high R readings (above 90% range) for all three housing markets. However, none of
these equations had included Education as a significant predictor. Education had failed to
demonstrate itself to be an essential determinant impacting house prices in Melbourne
Residential Tourism (RT)
Pearson Correlation Coefficient analysis was performed to explore if RT was statistically correlated
to house prices in Melbourne Metropolitan, Clayton and Doncaster. This new non-traditional
indicator represented by Long Term Visitor Arrivals (LTVA) and Short Term Visitor Arrivals in Victoria
(STVAV), was tested to establish if it had assisted in driving overseas investments in Australias
residential property markets. The significance of this new determinant was further tested using
Stepwise Multiple Linear Regression analysis to establish if the relationship between the predictor
(Residential Tourism) and house prices (dependent variable) was explained by a linear relationship.
The result of Stepwise Multiple Linear Regression analysis with the interaction of Residential
Tourism as a new determinant, with all other leading economic indicators is an acceptable model
representing future house prices in Melbourne Metropolitan, Clayton and Doncaster.
Analysis revealed that there were statistically significant relationships between RT and house prices
in Melbourne Metropolitan, Clayton and Doncaster for 2002-2013. Significant correlations between
RT and house prices as r-values were classified according to the lagged periods in Table 4.28.
RT was ranked to assess its interaction with other significant economic leading indicators.
Conclusively RT was statistically significantly correlated in all the residential property markets
(Melbourne Metropolitan, Clayton and Doncaster) at the 0.01 level and 0.05 (2-tailed) levels. RT
was ranked 10th in Melbourne Metropolitan, 12th in Clayton and 11th in Doncaster.
The Stepwise Multiple Linear Regression analysis had also provided three adequately fitted lines
that possess high R readings at or above the 90% range with RT incorporated as a determinant.
The effect of RT, as a new determinant of house prices improved the accuracy of the fitted
regression line and its significance was particularly noticeable towards the latter part of the data
series for Melbourne Metropolitan and Doncaster. The new fitted line moved closer to the actual
house price indexes from 2002 to 2013. The house price surge observed in Melbourne Metropolitan
towards the latter part of the time series, which was unable to be modelled relying on traditional
economic indicators, was partly explained in this new equation after RT was included. The inclusion
of RT as a determinant resulted in a very close resemblance to the actual house prices movement in
156
Melbourne Metropolitan and Doncaster. The fitted regression lines were validated using the latest
house prices until 2014. The regression models were able to forecast house prices accurately with
less than 3% variance in Doncaster, 7% in Clayton and 2% in Melbourne Metropolitan.
4.6. Overseas Determinants - China Factors
A Push & Pull model was developed in this study to facilitate orderly assessment of potential
factors exerted from overseas government policies that push the outward FDI into the Australian
residential property market (refer to Figure 3.2). This model was structured mainly based on the
main structure and essence of the three markets model from Higgins (2010). The three market
model amplifies the critical relationships between Property, Space and Capital Markets in assessing
the Australian government policies influence over house prices (Higgins, 2010). The Push & Pull
model, beside illustrating the extent of the Australian Government policies impacts on the
Australian housing market, assisting in an orderly assessment of external factors and their impact on
the structure of the local residential property market. This model aims to provide a structural
platform for systematic assessment of various economic, financial and property market dynamics on
housing market with an added push platform representing interactions originated from the
foreign investors country (or countries).
These push factors were factors originated from overseas and potentially exerting additional
interactions among all the determinants on top of the original pull factors from the Australian
economic system. Chinas major economic and financial indicators form the basis of assessment for
this section and are analysed as the Push factors resulting from Chinas government policies
impacting on Australian Space and Capital Markets particularly.
The Australian factors and determinants were duly assessed and analysed in earlier sections of this
Chapter. This section intends to show the Push & Pull model for the allocations of relevant
economic and financial indicators (from China) into the defined Space, Property and Capital Markets
for assessing the critical relationship among the potential key overseas determinants and to build an
economic model showing the best inter-relationship of separate economic variables to house prices
at both local and offshore economic and financial levels.
In the planned research execution, Australian historical leading economic indicators used in the
earlier sections of this chapter were to be replicated to allow for comparison and to provide the
consistent assessments on Chinas leading economic indicators. However this was proven to not be
a viable research proposition due to a lack of long series of China statistical data. Specific property
economic data such as rent growth that formed an important Australian leading economic indicator
157
in the property market assessment does not exist in the National Bureau of Statistics China (NBSC)
database. The lack of Chinese property leading indicators resulted in some replacement metrics
being adopted by using other more common Chinese leading indicators or replacement with other
existing Chinese economic indicators. Table 4.36 shows the selected Chinese leading economic
indicators and their data points, replacing the Australian leading economic indicators in earlier
sections of this Chapter:
Table 4.36: Chinese Independent Variables and Data Points
Independent Variables - China

Data Commencement
Data Last Data Points
I Space Market Source Date** Intervals Date Collected
1 Per Capita Disposable Income of urban Households, Accumulated(yuan) NBSC~ Q1 2005 Quarterly Q4 2013 32
2 China GDP Growth Rate NBSC~ Q1 2002 Quarterly Q4 2013 45
3 China CPI Inflation (All Items) OECD Library Q1 2002 Quarterly Q4 2013 45
4 China Outflow of FDI OECD Library Q1 2007 Quarterly Q4 2013 28
5 Price Index for Investment in Fixed Assets , Accumulated NBSC Q4 2002 Quarterly Q4 2013 42
192
II Capital Market
1 Shanghai Stock Market Index Yahoo Finance Q1 2003 Quarterly Q4 2013 43
2 China Foreign Currency Exchange Rates OECD Library Q1 2002 Quarterly Q4 2013 45
3 China Short Term Interest Rates OECD Library Q1 2002 Quarterly Q4 2013 45
4 China Balance of Payments(MEI) OECD Library Q1 2002 Quarterly Q22013 43
176
III Property Market
1 Price Indices of Construction and Installation , Accumulated NBSC~ Q4 2002 Quarterly Q4 2013 42
2 China Residential Buildings Floor Space Completed NBSC~ Q1 2004 Quarterly Q4 2013 37
3 Floor Space Newly Started NBSC~ Q1 2004 Quarterly Q4 2013 37
4 China Construction Output Value NBSC~ Q4 2003 Quarterly Q4 2013 38
154
~ National Bureau Of Statistics China Total Data Points Collected 522
As shown in Table 4.36, all leading Chinese Economic indicators were collected from OECD and NBSC
to form the unobtrusive measure (Teddlie and Tashakkori, 2009) of the independent variables (IVs)
of the model. However, contrary to the research design and intention, the collection of Chinese
statistical data proved to be a challenging exercise. On top of the non-existence of some data as
stipulated above, limited data series in the data sets listed in Table 4.36 had posed threats to the
implementation of the forecasting model and the eventual accuracy and validity of the statistical
testing. Table 4.36 highlighted that only 522 data points were collected compared to the research
designs objective of 624 data points of Chinese leading economic indicators. The data points were
further reduced substantially after the application of data smoothing and lagging (8 quarters).
Unless the relationships between the Dependant Variables (DVs) and Independent Variables (IVs)
are very strong, a small sample may not be enough to detect significant relationships. Small samples
do not provide a precise estimate of the strength of the relationship, which is measured by adjusted
R. If a precise estimate is needed, larger samples would be necessary. A larger sample was not
158
available with reference to Chinese leading economic indicators. Wang and Jain (2003) explained
that large sample properties are the basis of statistical analysis and inference. Quarterly data need
more data points because of the presence of seasonality in the data.
Due to the limited time series and substantial paucity of data point availability, the multiple
regression analysis is not viable for the statistical testing for the Push factors from China. Instead,
descriptive analysis is used in this section to replace multiple regression modelling. The final stage of
the quantitative research on Chinese leading economic indicators is consisted predominantly of
conducting bivariate statistical analysis to test the model. Bivariate analysis represents a simple
descriptive analysis, to describe the relationship between two variables (Babbie, 2015). The study
applied easy-to-understand measures to communicate the analysis and results and correlations as
inferential statistics for the model. Correlation matrix Pearson Correlation Coefficient (R)
methodology was use to analyse the nature and relationship between the economic factors from
China in the respective Space, Property and Capital Markets (IV) and house prices of the selected
areas (DV).
4.6.1. Descriptive Correlation Analysis
This section aims to explore the existence of significant relationships between the Chinas economic
indicators from the respective Space, Capital and Property Markets and house prices in Melbourne
Metropolitan, Clayton and Doncaster. SPSS software was used to compute both the Pearson
Correlation Coefficients, r-value, along with the significance levels. As per the test criteria set in the
Chapter 3: Research Design and Methodology, the strength and direction of the correlations
between house prices performance in each and every location and significant influencing economic
indicators shall be identified for both current and lagged eight (8) quarters period. Microsoft Excel
was used to tabulate graphs and charts for trend analysis on significant correlated Chinese economic
indicators with house prices in the selected locations.
Correlations were measured for Melbourne Metropolitan house prices and the respective economic
indicators from China. The main leading economic variables and the significance of their relationship
with house prices in Melbourne Metropolitan are summarised in Table 4.37:
159
Table 4.37: Correlation of Chinese Leading Economic Indicators with Melbourne Metropolitan
House Prices
Melbourne Metropolitan Lag (Months)
Current 3 6 9 12 15 18 21 24
Space Market
Per Capita Disposable Income of urban Households, Accumulated(yuan) -0.06 -0.12 -0.19 -0.12 -0.03 -0.01 -0.05 -0.01 0.22
China GDP Growth Rate 0.59** 0.45** 0.20 -0.06 -0.35* -0.45** -0.52** -0.52** -0.31
China CPI Inflation (All Items) 0.35* 0.17 0.03 -0.10 -0.12 -0.16 -0.30 -0.12 -0.26
China Outflow of FDI 0.09 0.16 0.10 -0.13 -0.17 -0.10 -0.10 0.30 0.22
Price Index for Investment in Fixed Assets , Accumulated 0.22 -0.19 -0.54** -0.70** -0.58** -0.35* -0.12 0.06 0.21
Capital Market
Shanghai Stock Market Index 0.41** 0.57** 0.51** 0.37* 0.04 -0.31 -0.40* -0.46** -0.31
China Foreign Currency Exchange Rates 0.13 0.27 0.33* 0.23 -0.02 -0.30 -0.54** -0.62** -0.59**
China Short Term Interest Rates 0.32* -0.06 -0.35* -0.60** -0.58** -0.41* -0.31 -0.11 0.02
China Balance of Payment(MEI) -0.20 -0.29 -0.26 -0.11 0.01 0.06 0.13 0.08 -0.05
Property Market
Price Indices of Construction and Installation , Accumulated 0.23 -0.18 -0.53** -0.69** -0.57** -0.34* -0.11 0.07 0.22
China Residential Buildings Floor Space Completed 0.04 0.03 -0.03 -0.01 0.02 -0.08 -0.10 -0.01 0.20
Floor Space Newly Started 0.43** 0.21 -0.08 -0.28 -0.48** -0.48** -0.44* -0.24 -0.04
China Construction Output Value 0.07 0.01 -0.08 -0.09 -0.09 -0.06 -0.10 -0.04 0.09
Table 4.37 shows the summary of the SPSSs analysis for various Chinese leading indicators from
Space, Capital and Property Markets that provide significant relationships between the selected
economic factors and the house prices in Melbourne Metropolitan residential property markets for
the series of 2002-2013. Significant correlations between the leading economic indicators and
Melbourne Metropolitan house prices as r value classified according to the lagged periods are listed
in Table 4.38 as below:
Table 4.38: Pearson Correlation Coefficients, r values and the Lagged Periods For Melbourne
House Prices
1 Price Index for Investment in Fixed Assets , Accumulated Space Market -0.70 9 months
2 Price Indices of Construction and Installation , Accumulated Property Market -0.69 9 months
3 China Foreign Currency Exchange Rates Capital Market -0.62 21 months
4 China Short Term Interest Rates Capital Market -0.60 9 months
5 China GDP Growth Rate Space Market 0.59 Current
6 Shanghai Stock Market Index Capital Market 0.57 3 months
7 Floor Space Newly Started Property Market -0.48 12 months
8 China CPI Inflation (All Items) Space Market 0.35 Current

9 China Outflow of FDI Space Market 0.30 21 months
10 China Balance of Payment(MEI) Capital 0.29 3 months
11 China Residential Buildings Floor Space Completed Property Market 0.20 24 months
12 Per Capita Disposable Income of urban Households, Accumulated(yuan) Space Market -0.19 6 months
13 China Construction Output Value Property Market -0.09 9 months
160
Among the leading Chinese economic indicators, seven variables were statistically significant at the
0.01 level (2-tailed) deriving from Capital, Property and Space Markets respectively. One variable
was statistically significant at the 0.05 level (2-tailed) from Space Markets. Five variables were
statistically insignificant from Capital, Property and Space Markets. Of all the Chinese economic
indicators that were significantly correlated with house prices in Melbourne Metropolitan, six of the
leading indicators were correlated within the short term or 12 month lagged periods.
Table 4.38 showed that over the period from 2002 to 2013, there were eight variables significantly
correlated with the house price performance in Melbourne Metropolitan. Three economic indicators
demonstrated a positive correlation with the house prices in Melbourne Metropolitan and five
economic indicators demonstrated negative correlation. The positively correlated Chinese
indicators, namely China GDP Growth Rate, Shanghai Stock Market Index and China CPI inflation are
all significantly correlated for the short term period or within a 12 month lagged period. Both
Chinese Foreign Exchange Rates and China Short Term Interest Rates were negatively correlated
with Melbourne Metropolitan house prices. The other negatively correlated Chinese leading
economic indicators were Price Index for Investment in Fixed Assets, Price Indices of Construction
and Installation and Floor Space Newly Started. Negative relationships between these five economic
indicators with Melbourne Metropolitan house prices demonstrated noteworthy relationships
existed between these Chinese economic indicators and Melbourne Metropolitan house prices and
further analysis was justified.
China Determinants Analysis
Among the leading indicators, two leading Chinese economic indicators were selected for the
subsequent bivariate descriptive analysis based on their positive significant level and instant impact
on Melbourne Metropolitan house prices (current or close to current lagged period). China GDP
growth rate (CGDP) was statistically significantly correlated with the median house prices in
Melbourne and produced a positive 0.591 r-value. The significant r-value of the China GDP growth
rate was reflected in the current period for the lagged data assessment. The other statistically
significantly correlated Chinese leading factor was the Shanghai Stock Exchange Indices (SSE). The
SPSS analysis produced a 0.566 r-value positively correlated for SSE with median house prices in
Melbourne Metropolitan within the three month lag period. Figure 4.12 demonstrates the
annualised movement analysis of CGDP, SSE and Melbourne Metropolitan house prices:
161
Figure 4.12: Annualised Movement of China GDP, SSE and Melbourne Metropolitan House Prices
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
-20.0%
-30.0%
-40.0%
Nov-03
Nov-04
Mar-05
Nov-05
Nov-06
Nov-07
Nov-08
Nov-09
Nov-10
Nov-11
Mar-12
Nov-12
Nov-13
Mar-03
Mar-04
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-13
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
MelHse MelMetro GDP Current SSE Current
Sources: REIV 2015, NBSC 2015, Yahoo Finance 2015
The quarterly movements of the two Chinese leading economic indicators and Melbourne median
house prices were graphed to highlight the respective inclinations in Figure 4.12. There were clearly
two significant growth periods for both of the indicators. The first significant growth period
happened during 2006 to late 2007. The second growth period occurred from early 2009 to late
2011. As mentioned in Section 4.3, house prices in Australia suffered setbacks in a similar manner
and time frames. Specific reference was made to the two infamous economic predicaments during
GFC 2008 and European countries sovereign debt crisis. SSE was believed to have suffered a similar
fate during these two financial predicaments and the negative impacts were clearly shown in Figure
4.12. However, China GDP growth suffered a setback only during GFC 2008 and that was relatively
muted compared to the European sovereign debt crisis. In 2008, China implemented a stimulus
package for an estimated USD586 billion injection into Chinas economy or roughly 7% of its gross
domestic product to construct new railways, subways and airports and to rebuild communities
devastated by an earthquake in the southwest in the same year (Maidment, 2008). In the midst of
world economies integration and liberation activities, Australia as a macroeconomic structure and
Melbourne Metropolitan residential property markets as a major Australian economy component
were increasingly affected and impacted by the world economys performance.
Correlations were measured for Clayton house prices and the respective Chinese economic
indicators listed in Table 4.39 as below:
162
Table 4.39: Correlation of China Leading Indicators with Clayton House Prices
Clayton Lag (Months)

Current 3 6 9 12 15 18 21 24
Space Market
Per Capita Disposable Income of urban Households, Accumulated(yuan) 0.07 0.02 -0.02 0.01 0.06 -0.01 -0.04 0.02 0.18
China GDP Growth Rate 0.43** 0.40* 0.14 -0.11 -0.26 -0.31 -0.23 -0.11 0.06
China CPI Inflation (All Items) 0.23 0.01 -0.16 -0.15 -0.30 -0.25 -0.22 -0.12 -0.07
China Outflow of FDI 0.19 0.14 0.00 -0.13 -0.10 -0.23 0.11 0.20 0.06
Price Index for Investment in Fixed Assets , Accumulated 0.06 -0.19 -0.47** -0.52** -0.33* -0.20 0.07 0.23 0.21
Capital Market
Shanghai Stock Market Index 0.51** 0.68** 0.64** 0.41* 0.17 -0.17 -0.27 -0.30 -0.18
China Foreign Currency Exchange Rates 0.01 0.16 0.21 0.12 -0.06 -0.21 -0.35* -0.34* -0.23
China Short Term Interest Rates 0.14 -0.16 -0.34* -0.40* -0.33* -0.16 -0.10 0.02 0.05
China Balance of Payment(MEI) 0.00 -0.06 0.01 0.18 0.35* 0.32 0.34* 0.24 0.13
Property Market
Price Indices of Construction and Installation , Accumulated 0.02 -0.23 -0.48** -0.51** -0.31 -0.16 0.09 0.22 0.21
China Residential Buildings Floor Space Completed 0.10 0.02 0.03 0.01 0.03 -0.11 -0.01 0.06 0.33
Floor Space Newly Started 0.31 0.08 -0.10 -0.32 -0.35 -0.27 -0.16 0.01 0.21
China Construction Output Value 0.07 -0.02 -0.08 -0.10 -0.04 -0.10 -0.05 -0.03 0.11
Table 4.39 shows the summary of the SPSSs analysis for various leading Chinese indicators from
Space, Capital and Property Markets that provided significant relationships between the selected
economic factors and house prices in Clayton for the series of 2002-2013. Significant correlations
between the Chinese economic indicators and Clayton house prices as r-value classified according to
the lagged periods are summarized in Table 4.40 below:
Table 4.40: Pearson Correlation Coefficients, r values and the Lagged Periods For Clayton
Housing Market
Clayton
6 China Balance of Payment(MEI) Capital Market 0.35 12 months

10 China CPI Inflation (All Items) Space Market -0.30 12 months
11 China Outflow of FDI Space Market -0.23 15 months
12 Per Capita Disposable Income of urban Households, Accumulated(yuan) Space Market -0.18 24 months
13 China Construction Output Value Property Market 0.11 24 months
As shown in Table 4.40, Shanghai Stock Market Index and China GDP Growth Rate had again
presented a statistically significant correlation at 0.01 level and impacted the Clayton house prices
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at the current period (current and 3 month period) compared to other indicators. SSE Index ranked
the highest in r-value and had a positive correlation with the house prices in Clayton within three
month lagged period. Similar to Melbourne Metropolitan residential property market, China GDP
growth rate and SSE index had again emerged as significantly correlated economic indicators in the
most current period.
Bivariate descriptive analysis was performed on the two selected Chinese economic leading
indicators, namely China GDP growth rate and SSE index. Figure 4.13 demonstrates the movement
analysis:
Figure 4.13: Annualised Movement of China GDP Growth, SSE and Clayton House Prices
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
Mar-13
Mar-03
Aug-03
Mar-08
Aug-08
Aug-13
Apr-05
Dec-06
May-07
Apr-10
Dec-11
May-12
Jun-04
Oct-07
Jun-09
Oct-12
Jan-04
Nov-04
Jan-09
Nov-09
Sep-05
Feb-06
Jul-06
Sep-10
Feb-11
Jul-11
Clayton GDP SSE
There were clearly two significant growth patterns for both of the indicators. The first significant
growth happened during the period of 2006 to late 2007. The second occurred from early 2009 to
late 2011. As mention in Section 4.3 in this chapter, house prices in Australia suffered setbacks in
the similar manner and time frames specifically GFC 2008 and European countries sovereign debt
crisis. SSE was believed to have suffered a similar fate during these two financial crisis and the
negative impacts were clearly shown in Fgure 4.15.
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Correlation analysis was repeated for the Doncaster house prices and the respective Chinese
economic indicators with the resulted tabulated in Table 4.41:
Table 4.41: Correlation of Chinese Leading Indicators with Doncaster House Prices
Doncaster Lag (Months)

Current 3 6 9 12 15 18 21 24
Space Market
Per Capita Disposable Income of urban Households, Accumulated(yuan) -0.08 -0.03 -0.05 -0.11 -0.09 -0.03 0.01 0.08 0.19
China GDP Growth Rate 0.55** 0.34* 0.06 -0.15 -0.31 -0.37* -0.40* -0.33* -0.19
China CPI Inflation (All Items) 0.18 0.00 -0.07 -0.16 -0.13 -0.21 -0.33 -0.20 -0.23
China Outflow of FDI 0.28 -0.05 -0.14 -0.07 -0.24 -0.04 0.21 0.16 0.21
Price Index for Investment in Fixed Assets , Accumulated -0.02 -0.41* -0.60** -0.49** -0.40* -0.17 -0.03 0.05 0.16
Capital Market
Shanghai Stock Market Index 0.63** 0.76** 0.52** 0.18 -0.10 -0.35* -0.43** -0.33 -0.19
China Foreign Currency Exchange Rates 0.29 0.40* 0.33* 0.13 -0.12 -0.34* -0.47** -0.46** -0.35*
China Short Term Interest Rates 0.08 -0.25 -0.43** -0.50** -0.40* -0.31 -0.19 -0.11 -0.02
China Balance of Payment(MEI) -0.05 -0.08 0.02 0.17 0.16 0.11 0.09 0.12 0.17
Property Market
Price Indices of Construction and Installation , Accumulated -0.01 -0.41* -0.59** -0.49** -0.39* -0.17 -0.02 0.06 0.16
China Residential Buildings Floor Space Completed -0.02 0.08 0.02 -0.05 -0.08 -0.01 0.09 0.11 0.24
Floor Space Newly Started 0.20 0.03 -0.17 -0.39* -0.43* -0.31 -0.22 -0.08 0.06
China Construction Output Value -0.01 -0.05 -0.09 -0.05 -0.18 -0.03 0.02 -0.01 -0.03
Table 4.41 shows a summary of the SPSSs analysis for various leading Chinese indicators from
Space, Capital and Property Markets that provide significant relationships between the selected
Chinese economic factors and house prices in Doncaster for the series of 2002-2013. Significant
correlations between the Chinese economic indicators and Doncaster house prices, as r-value, were
further summarised according to the lagged periods in Table 4.42 below:
Table 4.42: Pearson Correlation Coefficients, r values and the Lagged Periods For Doncaster
House Prices
Doncaster

8 China CPI Inflation (All Items) Space Market -0.327 18 months
9 China Outflow of FDI Space Market 0.278 Current
11 Per Capita Disposable Income of urban Households, Accumulated(yuan) Space Market 0.193 24 months
12 China Construction Output Value Property Market -0.175 12 months
13 China Balance of Payment(MEI) Capital Market 0.168 9 months
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The leading Chinese economic indicators that were statistically significant at the 0.01 level had
increased in number to six indicators as compared to four in Clayton (seven in Melbourne
Metropolitan). Among all the Chinese economic indicators that are significantly correlated with the
house prices in Doncaster, two of the leading indicators are positively correlated within the 3
months periods, namely China GDP growth rate and SSE index. Once again SSE Index ranked the
highest in r-value and had a positive correlation with house prices in Doncaster within the three
month lagged period. The other positively correlated indicator was China GDP Growth Rate (ranked
fourth) for the current period.
Among the leading indicators, SSE index ranked the highest in r-value or the most statistically
significant correlated Chinese economic leading indicator, with a positive 0.758 r-value; even higher
than the r-value in Clayton market. The other statistically significant correlated China leading factor
was again, the China GDP growth rate (CGDP) which demonstrates a significant current period
correlation. Figure 4.14 demonstrates the movement analysis:
Figure 4.14: Annualised Movement of China GDP Growth, SSE and Doncaster House Prices
40.00%
30.00%
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-40.00%
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Nov-03
Nov-04
Nov-05
Jul-06
Nov-06
Nov-07
Nov-08
Nov-09
Nov-10
Nov-11
Nov-12
Nov-13
Jul-03
Jul-04
Jul-05
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
HsePxMoveM GDP SSE
Once again, the quarterly movements of the two Chinese leading economic indicators and
Doncaster house prices demonstrated similar inclinations as the Clayton and Melbourne housing
markets as depicted in Figure 4.17. There were clearly two significant growth periods for both of the
indicators. The first happened during the period of 2006 to late 2007. The second occurred from
early 2009 to late 2011. As mentioned in Section 4.3 in this chapter, house prices in Australia
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suffered setbacks in a similar manner and time frame to two infamous economic predicaments, GFC
2008 and European countries sovereign debt crisis.
4.7. Summary of Key Points
The aim for this study was to explore the existence of significant relationships between overseas
investments and the residential housing markets performance in Melbourne Metropolitan,
particularly in areas that had experienced significant growth subsequent to GFC2008. This
quantitative phase of this study aimed to analyse the relationship and validity of various key
determinants overseas investments had on house prices on the Melbourne Metropolitan and two
selected Melbourne suburbs. This research phase involved collecting and analysing historical
secondary data to identify the traditional leading economic indicators and new determinants that
had impacted the Australian residential property markets performance. Once the significant
correlated economic indicators and determinants were identified, this information formed the
pillars for the subsequent qualitative investigation to help explain, or elaborate on, the quantitative
results obtained. The findings of this QUAN research phase provided the much needed rationales
and directions for the subsequent selections of participants (QUAL) and semi-structured interviews
questionnaires. The analysed data from both Quantitative and Qualitative analysis will assist in
identifying the new drivers impacting overseas investors property asset allocation strategies and
decision-making.
The quantitative phase of this study incorporated probability samplings characterised by

econometric equations and formulas. The result of the analysis of these samples, gathered through
probability techniques, formed the background theories of how and what factors drive overseas
investors into Melbournes residential property market. Inferential statistics was applied in which
the sample of Melbourne residential property markets constitute the smaller data set inferring the
larger population of Australian residential property market.
This research falls into this classification of a predictive design method having house prices
performance in the selected suburbs will be forecasted to predict the future trend and to ensure
validity of the model. Three statistical tests were applied to analyse the strength of the relationships
between the dependent variables (House Prices) and independent variables (Australian Leading
Economic Indicators, Non-traditional factors and Chinese Leading Economic Indicators) to confirm
the validity of the model, namely:
i. Descriptive Analysis
ii. Correlation Matrix Pearson Correlation Coefficient (R)
iii. Multiple Linear Stepwise Regression
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These techniques were used to first explore the existence of significant relationships between the
Australian leading economic indicators and the median house prices in Melbourne Metropolitan and
the 2 selected suburbs. Two non-traditional factors, namely Education (International Student
Enrolments) and Residential Tourism (Long Term and Short Term Tourist Arrivals in Victoria) were
introduced and the same methodology was applied to test their relationship significance with the
median house prices of the selected suburbs. Finally, the existence of significant relationships
between the Chinese leading economic indicators from the respective Space, Capital and Property
Markets and the median house prices in Melbourne Metropolitan and the 2 selected suburbs was
explored.
4.7.1. Overseas versus Local Determinants
Quantitative analysis on secondary data had successfully provided three regression equations
modelling the house prices for Melbourne Metropolitan, Clayton and Doncaster. Based on the
correlation matrix and the three regression equations, factors associated with offshore investments
had predominantly shaped the models and emerged more significant among all the traditional
economic indicators. For example, 10-year Government Bond Yields (10Bond), Foreign Currency
Exchange (Forex) and Net Overseas Migration were significantly correlated and formed the crucial
components of the regression equations and correlation matrix. They surpassed the importance of
other traditional residential market determinants such as rent growth, GDP per capital growth and
net saving rates.
According to Bowe (2012), Australias second largest export was actually the Australian
Commonwealth Government Bonds (ACGBs). In the 12 months until June 2012, Australia sold
AUD58 billion worth of ACGBs to foreign investors, exceeding the AUD48 billion worth of coal
exported, second only to the AUD85 billion of iron ore exports over the same period. As at June
2015, the Australian Office of Financial Management (AOFM, 2015) reported that approximately
65.2% of the Australian Government Securities (Treasury Bonds, Treasury Indexed Bonds, and
Treasury Notes) were in the hands of foreign investors. As foreign investors keenly pursue an
alternative asset class as part of their diversified portfolio, real estate had emerged as a crucial asset
class alongside with ACGBs with similar investment trend observed.
Net Overseas Migration (NOM) was one of the major traditional drivers of Australian residential
property markets in this study and is consistent with various empirical studies (for example Benson,
2009, Borjas, 1994). The significant negatively correlated relationship between the Foreign
Exchange Rate (Forex) is consistent with the overseas investment stratagem. Australian assets
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became more economically affordable when Australian currency was devalued against other foreign
currencies. The foreign exchange factor is particularly relevant in terms of holding long terms assets
such as properties from the investors perspective.
4.7.2. Education
Correlation Coefficient analysis was performed to explore if International Student Enrolment in

Victoria State (Education) was statistically significantly correlated to house prices in Melbourne
Metropolitan, Clayton and Doncaster. The significance of this new determinant was further tested
using Stepwise Multiple Linear Regression.
SPSSs Pearson Correlation Coefficient (R) statistical analysis revealed that there were statistically
significant relationships between Education and house prices in Melbourne Metropolitan, Clayton
and Doncaster residential property markets for 2002-2013. International Student Enrolments, a non-
traditional socio-economic indicator, was proven significantly correlated with all the property
markets tested at the 0.01 level (2-tailed) with the house prices in both Clayton and Doncaster and
0.05 level (2-tailed) with the house prices in Melbourne Metropolitan. In Clayton housing market,
International Student Enrolment ranked high compared to other traditional economic indicators in
terms of r-value or significance level. The validity of this model was well supported by the fact that
Monash University and John Monash Science School are both located in Clayton. Monash University
has continued its rise in international university rankings, according to results released by Times
Higher Education (Williams, 2015). John Monash Science Scholl is the state's first specialist science
secondary school and is a state government coeducational specialist selective school in Victoria.
Although Education failed to demonstrate itself to be an essential determinant affecting the house
prices in in the Stepwise Multiple Linear Regression analysis, the validation of Education as a
statistically significant correlated factor on Melbournes housing market formed the basis for
subsequent qualitative analysis and provided the rationale and directions for the subsequent
selections of participants (QUAL) and semi-structured interview questionnaires.
4.7.3. Residential Tourism
The non-traditional factor RT was incorporated to assess its interaction with other traditional
economic indicators using the Higgins (2010) three-market model. The correlations and regression
equations were tested for statistical reliability and visually examined. Residential Tourism,
represented by Long Term Visitor (LTVA) in Australia and Short Term Visitor Arrivals in Victoria
(STVAV), were statistically significantly correlated to house prices in Melbourne Metropolitan,
Clayton and Doncaster. The result of Stepwise Multiple Linear Regression analysis presented the
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interaction of Residential Tourism, as a new determinant, with all other leading economic indicators
in provision of an acceptable model representing future house prices in Melbourne Metropolitan,
Clayton and Doncaster.
Correlation analysis revealed that there were statistically significant relationships between
Residential Tourism and the house prices in all the housing markets for 2002-2013. Long Term
Visitor Arrivals (LTVA) demonstrated significant positive correlations (at 0.01 level (2-tailed)) with
the house prices in all the residential property markets. Short Term Visitor Arrivals in Victoria State
(STVAV) demonstrated significantly positive correlations reaching the 0.01 level (2-tailed)
significance level with Melbourne Metropolitan house prices and 0.05 level (2-tailed) with Doncaster
house prices. As the collection and classification between STVA and STVAV were not mutually
exclusive, stronger correlated STVAV is selected of the two as the potential factors for Melbourne
housing markets analysis.
The Stepwise Multiple Linear Regression analysis had successfully provided three adequately fitted
lines that possess high R readings above 90% range for all three markets under the assessments.
The summary results of the analysis for the three residential property markets were shown in
Figures 4.9, 4.10 and 4.11. There were improvements in the R readings across all the residential
property markets subsequent to the incorporation of the non-traditional factors of RT. Visual
representation and assessment of the graphs demonstrated better fitted regression lines across all
markets under the assessment with the new variable of RT. The fitted regression line was further
validated using the latest house prices in 2014. The difference between the actual index and the
model predictions was not substantial confirming the regression equations had provided better
prediction models compared to the model developed earlier without the Residential Tourism
variable.
The effect of Residential Tourism, as a new determinant of house prices in Melbourne Metropolitan,
improved the accuracy of the fitted regression line and its significance. This was particularly
noticeable towards the latter part of the data series. The new fitted line had moved the fitted line
closer to the actual house prices starting from year 2013 until the end of the time series. House
price movement observed in Melbourne Metropolitan and Doncaster towards the latter part of the
time series, which was unable to be modelled relying on traditional economic indicators, can be
partly explained in this new equation by incorporating a new determinant of Residential Tourism.
In Clayton, the non-traditional socio-economic factor of Education, although reflected as a strongly

correlated factor in the correlation analysis was not included in the prediction model. The final
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regression equation provided a better prediction model compared to the earlier model by the
incorporation of the Residential Tourism variable. The R readings had improved from 93.8% to
94.8% in this predictive model with the addition of the non-traditional determinant RT. The effect of
RT, as a new determinant of house prices in Clayton, had improved the accuracy of the fitted
regression line moderately.
4.7.4 China Factors
The Higgins (2010) model, together with the Push & Pull model established in this study, were
used to build an economic model showing the best inter-relationship of Chinese leading economic
indicators to house prices. Chinese major economic and financial indicators formed the basis of
assessment for this section and were analysed as the Push factors originating from Chinas
Government policies impacting on Australian Space and Capital Markets.
The planned research implementation in this phase was proven unsuccessful due to the limited
availability of Chinese statistical data. The collection of Chinese statistical data proved to be a
challenging exercise. Leading Chinese Economic indicators were intended to be collected from OECD
and NBSC to form the unobtrusive measure (Teddlie and Tashakkori, 2009) of the independent
variables of the model. However, the forecasting model was unable to be executed due to limited
data series from both OECD and NBSC. Quantitative analysis needs more data points because of the
presence of seasonality in the data. The annualised OECD Chinese leading economic data was
proven inadequate and the NBSC database did not capture some of the leading economic data. For
example, rent growth does not exist in the NBSC database although it is a crucial traditional
economic indicator for both correlation and regression analysis.
As a result, only 522 data points were collected for 13 datasets of Chinese leading economic data as
compared to the minimum 624 data points needed to proceed with statistical analysis. The data
points were further reduced subsequent to the applications of data smoothing and lagging of eight
periods, making the regression analysis impossible. Due to the limited time series and the limited
data availability, the multiple regression analysis was replaced by descriptive analysis in this part of
the research. The final stage of the research predominantly involved bivariate statistical analysis to
test the model. SPSS software was used to compute both the Pearson Correlation Coefficients, r-
value, along with the significance levels.
Among all the statistically significant correlated variables, China GDP growth rate and Shanghai
Stock Exchange Indies (SSE) consistently emerged as the two most significant positively correlated
economic indicators with their impacts noticeable in a short term lagged period. They were
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incorporated in the descriptive bivariate analysis. The visual representation revealed that China GDP
growth exceeded all other Indices, consistent with the widely reported significant growth in Chinas
economy during the assessment period. SSE enjoyed two periods of significant increases spanning
across year 2007 until the beginning of 2009 and for most of year 2010. These periods coincided
with the two peaks in Australian median house prices although not in the similar magnitude. The
first significant growth period happened during 2006 to late 2007. The second growth period
occurred from early 2009 to late 2011. House prices in Australia suffered setbacks in the similar
manner and time frames to the two infamous economic predicaments during GFC 2008 and
European countries sovereign debt crisis. SSE was believed to have suffered a similar fate during
these two financial events. In the midst of world economies integration and liberation, Australia as
a macroeconomic structure and Melbourne Metropolitan residential property markets as a major
Australian economy component were increasingly affected and impacted by world economies
performance.
It is certainly neither a new theory nor new knowledge that Chinas economic growth for the past
decade has impacted the global economies, evidenced by numerous and significant China FDI and
private investments in overseas markets. In the course of investigating the emerging drivers of
overseas private investment in the Australian residential property market subsequent to GFC 2008,
this research established that Chineses investments into cross border property markets is a function
of Chinas recent economic growth, impacting Australian residential property market performance
along the way.
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Chapter 5:
Qualitative Research
5.1 Introduction
Real estate industry experts opinions and insights form the key primary data for this phase of
research. This qualitative research is aimed to support, validate and seek insights subsequent to the
study conducted in the first phase Quantitative Research in Chapter Four. A semi-structured
interview research technique was selected in this phase of qualitative assessment. The evaluation of
new determinants in Australian residential property market was through feedback and discussions
with the relevant stakeholders. This method allowed for a focus on a particular unit of analysis
rather than the collection and analysis of data (Willig, 2013, Yin, 2013). The objective was to see the
research topic from the perspective of the interviewee, and to understand how and why the
individual came to their particular perspective (King et al., 1994). The qualitative semi-structured
interview in this study carried with the following aims:
i. To identify factors from both local and offshore parties, modelled around the
Space/Capital/Property Markets, causing or influencing overseas investors decisions
regarding acquiring Australian residential property.
ii. To identify and understand the government policies from both a local and offshore
perspective, the rationales and extent of such government policies causing offshore
investments in Australian residential property.
iii. To evaluate the impact non-traditional factors have had on overseas investors decision
making.
Judgements of the researcher with regard to professional knowledge can provide the best
information to achieve the objective of the study and represented the key feature of this research
phase (Teddlie and Yu, 2007). Key stakeholders in the Australian property professions of consultants
and researchers were targeted as interviewees for the study to ensure adequate coverage and
references. The selection of interviewees was based upon their involvement in the residential
property industry and seniority in their respective organisations decision making process. Most
participants selected were either senior executive or owners of their respective firms.
Teddlie and Tashakkori (2009) explained that there were no rules for sample size in qualitative
studies and typically purposive samples were small. In this study, the intended sample size was 15
participants, eight from Melbourne and seven from China, comprised of a wide range of experts
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from both overseas (China) property market and the local (Melbourne) property market including
Property Consultants, Agencies, Developers and Legal and Financial Advisors. They are the key
players in the property industry who play the role as vital information providers to the investors.
Figure 5.1 illustrates the interview approaches adopted in this study to ensure adequate and
strategic coverage of key players in the property industry.
Figure 5.1 Semi-structured Interview Plan
Australia Melbourne Property New Supply

Market
- 8 interviewees
Reas Estate Consultants Property Financial/Legal

Developers Professionals
Local & Overseas
Property Researchers
Agents
China
Market Reas Estate Consultants Financial/Legal Professionals
- 7 interviewees
Property Agents Researchers
Chinese Investors
Figure 5.1 depicts the identified four key stakeholders in the residential housing market
representing four different professional sectors. Two stakeholders from each category were
interviewed to provide a range of opinions and experiences were included in the analysis. The
interview exercise was expanded to interviews conducted in China to address the push factors of
the research. Two versions of the questionnarie were formulated specifically for China and
Australian interviewees (Appendices II & III) involving a total of 12 interview questions for each
segment. Codes were assigned to each interviewee (Appendix IV) to ensure the responses were de-
identified, providing anonymity for the participants. These codes were used to report interview
responses.
Consequentially, eight interviews were successfully conducted in Australia (Melbourne) and seven in
China (Shanghai) making a total of 15 interviews with the property key stakeholders in two
countries. The interviews were undertaken in June and August 2015 at the interviewees place of
work, lasting approximately 30-60 minutes covering government policies, information on foreign
investors, property market conditions, tourist and international student enrolments information.
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Interview participants were identified through the authors and RMIT Universitys networks. The
qualitative data collected (descriptive and narrative) were audio recorded and transcribed.
The transcripts were thematically coded using the qualitative analysis software, NVivo. Relevant and
significant data collected from the semi-structured interview are gathered, analysed and arranged
thematically in accordance with the issue discussed. In the subsequent sections of Chapter Five, the
findings and analysis of the interviews are tabulated and discussed accordance with the topic as
stipulated in Appendix II and III. All the findings are supported and substantiated by the thematically
arranged actual quotes from the interview participants.
This Chapter has 5 sections. Subsequent to Section 5.1 introduction, Section 5.2 outlines the
investment in Australian residential property from the perspective of offshore investors and
determinants. New market determinants and drivers were tabled in Section 5.3 major government
policies from both China and Australia impacting Australian residential property market were
discussed in Section 5.4 and Section 5.5 summarises the qualitative research outcomes.
5.2 Offshore Investments In Australian Residential Property

5.2.1 Offshore Investors Large Scale Projects and Private Investments
Mega residential property development projects in Australia and their macroeconomic implications
were addressed by the interview participants from Australian global firms, providing the factual
aspect of residential property development in Australia. Recently Australian residential property
development projects had successfully attracted foreign investments funds. Residential property
development projects were no longer a domestic affair reserved solely for the Australian
developers. Competition is from foreign fund participations taking advantage of the strong
Australian residential property market. Beside the large overseas property development firms,
private wealth funds and HWNIs from Asia Pacific (including China, Singapore and Malaysia) were
actively involved in procuring central development sites, construction and selling residential
properties, specifically located in Sydney and Melbourne. Significant residential project
development initiatives were noticeable originating from Asia Pacific countries including China,
Singapore and Malaysia. Contrary to the most of the media reports that investors from China were
dominating the property market, Singapore had emerged as the biggest international property
buyer from the Asia Pacific in Australia towards the end of 2014. According to Chong (2014), more
capital flowed out of Singapore to global real estate than from China or Japan and about USD6.7
billion was spent in Australia by buyers from Singapore, compared with USD2.7 billion by Chinese
group. This was evident in the interviewees feedback.
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Quotes from Australian participants:
So starting with the Chinese, obviously theres a strong motivation from them to diversity their
portfolio of money/assets into places outside of China .. the one thing that nobody predicted
was in 2012 the Singaporean and Malaysian developers embarked on acquiring development
sites in Melbourne. (Australia-Global-Real-Estate-Agent)
High nets are through family office funds so theyre either investing through their office fund in
taking mass or equity stakes in projects or they are just high net individuals who are just looking
for passive active development(Australia-Global-Consultant).
Interview participants from China provided the macroeconomic rationales of outward FDI from
China to other parts of the world, including Australia. The reasons provided by the interview
participants, particularly from China, constitute the Push Factors for this study in accordance with
the Push & Pull model stipulated in Chapter 3.2.2. These push factors include underperformance
of Chinese residential property, Chinas relaxation of capital outflow restrictions, higher investment
returns in oversea markets, Chinas stimulus package, diversification, maintaining property
development margin. Among the rationales mentioned on Chinas aggressive outward FDI, three of
these rationales were deemed the major push factors:
i. Underperformance of domestic residential property market

ii. Relaxation of Chinas restriction on investments outflowing to overseas
iii. Diversification to overseas assets
Quotes from Chinese participants:
Three reasonFirstly is diversificationSecondly is the China property market is not so well at

the momentChinese property market are not going well, very well..recent year is not well as
before. So there is Chinese Government now is not so strict (on offshore investments).
Sometimes they encouraging.(China-Local-Agent)
purely from an investment standpoint, because over the last two to three years weve seen the
sort of underperformance of the China residential market because of the not so restricted,
restrictive government policies put in place.. theyve seen maybe better performance in other
markets like certain cities in Australia.( China-Global-Property-Researcher2)
A: because it was just part of maturing their business, to diversity their assets overseas, and a
lot of them werent getting the returns that they once were in China. Obviously theres a slow-
down in the economy here, there was a real estate, a perceived real estate housing bubble that
176
had the brakes put on it by the government with their measures, so that drove them to go
overseas and explore other options..B: maintain their development margins that theyd seen in
China, over sort of the previous decade..... They want us investing overseas.. the third thing is
China Government not encourage but they are not stopping as before. So people can send their
money to overseas. (China-Global-Researcher-1)
5.2.2 Local versus Foreign Buyers and The Australian International Brand Presence
Interview participants, particularly the Australian property professionals, asserted that retail
consumers from both domestic and international communities had fuelled the demand for
Melbourne residential property. China investors were singled out by market reports as the main
reason for the recent price escalation in Australian house prices particularly in Sydney and
Melbourne. The above misconception was rebutted in the semi-structured interview exercise and
participants attributed the recent improved market performance to the Australias increasing
relevance in worldwide cross-border business in the midst of global liberalisation. Results of
interviews revealed that there was also a huge misconception between local buyer and overseas
Investors by the market observers. The general public had conveniently concluded that successful
buyers who do not have a Caucasian appearance were deemed overseas buyer without a proper
understanding. Many of these buyers were actually migrants who have resided in Australia for a
long period of time. At this juncture, Australian citizenship categorisation is loosely defined and this
has partly resulted in confusion in terms of residential property buyers. With respect to Australia
becoming increasingly multicultural, a descriptive categorization similar to those used in the United
States for its citizens is recommended for future research purposes; i.e. Australian-Chinese,
Australian-Italian, Australian-Indian etc.
Quotes from Australian Participants:
Every Asian that turns up, apparently is a foreign investor. Thats nonsense, its just not true..
But the press whip it up into a frenzy(Australia-Global-Property-Researcher)
I couldnt say whether theyre Chinese or Malaysian or, but theyre Asian-based hubs. But
thats makes common sense. It just so happens that they like buying property, and they might
have been here, they just dont look Caucasian if you like, theres no differenceIts just because
they might look Asian, they might have been here for 20 or 30 (years) or more... I wouldve
thought they would get to probably 40% overseas investors.. I wouldve said 40 to 50% would
177
be local, if you like, migrants, most likely of Asian descent. Then youll get the balance, which I
thinks about 20%, of, if you like, local, of local investors..( Australia-Local-Property-Developer)
The media has portrayed this, oh Chinas taking over the world, were selling off all our land
and, well its not the case..As I said, we get a quite few from Malaysia, Singapore. Weve got
people from yeah, the UK, parts of Europe that have bought in Australia..Id have to say most,
70 to, probably 80% of our clients come from somewhere in Southeast Asia. If you, compared to
other areas of the world.(Australia-Local-Property-Researcher)
(Buyers are) local Chinesethats the strongest theme, but if you looked at our project out at
Knox, well there you could say that thats local Indian and local Chinese. If you went to Waverley
Park (development), you would say its local Chinese and local Caucasians. Theres always a mix
of the twothe kind of like the strong ethnic themes through the different developments,
especially in the suburbstheyre not FIRB.(Australia-Global-Property-Developer)
Australian interview participants validated that foreign investors are restricted to purchase only the
newly developed residential properties which observed many of them purchased off-the-plan
properties. Conducting regular road shows launching or promoting their residential projects in Asia
Pacific countries seems to be a common trend by the these property development companies, both
local and foreign institutions. Among the reasons for active foreign participations in these
promotion exercises, foreign investors perceived Australian properties positively in terms of cost of
acquisition. They were subjected to lessor foreign buying restrictions in Australia compared to other
world cities and countries like Singapore. As long as rental yield and the potential capital
appreciations were perceived favourable, these foreign investors would not hesitate to purchase
off-the-plan properties. Another positive factor was that foreign investors were given an official
freehold title for the properties they purchased in Australian residential properties. This factor was
described by some participants as one of the main drivers for investors from China due to the fact
that residents in China were precluded from this privilege and their properties were all in leasehold
titles. Many of these foreign investors were perceived favouring residential property in the major
cities in Australia such as Melbourne and in Central Business District (CBD) locations. Convenience
seems to be the main reason for this group of investors. They preferred to acquire property close to
work, schools, health care facilities, public transport and food. For those who acquired residential
properties in the suburbs, cultural familiarity was their main objective, resembling Visiting-Friends-
Relatives (VFR) in the study conducted by (Williams and Hall, 2000). Many of these investors
bought into these locations based on kinship whereby their friends and relatives had been the main
pulling factor.
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They (overseas investors) bought newly developed properties..this whole phenomenon that
were talking about is less than five years. In 2010 we started doing some sales (in overseas), but
we were doing them maybe because we need one or two and it just helped. When we realised
that hey, this is a meaningful part of our distribution channels it changed the way that we went
about things, it changes the way we sell, it changes the way we market (Australia-Global-
Property-Developer)
If they need to pay, they just need to pay a dollar more than the local buyer, to purchase. They
dont have to pay much more, they dont have to pay double. Theres no special taxes, or
prohibitions, theres no stamp duty penalties, or anything like that. They just have to pay a
dollar more. For overseas buyers, it looks particularly attractive. (Australia-Global-Property-
Researcher)
Asian buyers typically like buying a lot of land and they love freehold, they love freehold title,
and so, and Doncaster is a good location close to shopping, schools, transport, you know so, so is
Box Hill and so is North Melbourne.(Australia-Global-Consultant)
..I think the other big thing with Sydney and Melbourne is, theres a lot more interest from
Malaysian and Singaporean people in Melbourne, and theres probably a lot more interest in
Sydney property from mainland Chinese people we would rather live in the CBD than drive to
Geelong, because to commute to Geelong (along) the Westgate Freeway takes two hours for
something that should take thirty minutes, or forty minute.(Australia-Global-Real-Estate-Agent)
CBD location, this is very important, because their equivalent CBD location, very hard to buy,
very limited supply. CBD location..Close to jobs, close to education, close to health, safety,
security. This is very important to themClayton, Box Hill and Doncaster.. Its the
conglomeration of likeminded people, a cultural familiarity(Australia-Global-Property-
Researcher)
Due mainly to the open-ended approach adopted in the conduct of semi-structured interview, a
simple questionnaire of who are these investors triggered vigorous discussions among the
interview participants. Noteworthy that the same question had attracted two different perspectives
with regards to who these private individual investors would be.
Whilst in Australia the debates are ongoing with regards to who are these foreigners (foreigners or
migrants), the Chinese participants provided an entirely different perspective or response when
179
they were asked who are these overseas investors. They began by describing the emergence of
affluent Chinese and engaged in discussion on various macro and micro economic conditions in
China that drove them to invest in overseas residential properties.
Decades of substantial economic growth in China raised Chinas income per capita significantly. High
saving rates among all the Chinas residents had produced a significant amount of monetary
resources in China. However, investment options in China were limited. Stock Exchanges in China
had not been performing well and returns from commercial properties were subjected to high
capital gain taxes. All these factors had forced China residents to invest money into the local
residential property markets which observed prices of residential properties increase substantially
in all major cities in China. Although the potential capital gain of residential properties in China could
be substantial, the rental yield was merely two to three per cent per annum whilst the cost of
borrowing stood firm around six per cent per annum. Some had claimed that residential property
prices were overvalued and Chinese residents were not sure about value appreciation going
forward. These factors had driven Chinese residents to search for investment alternatives overseas
and potential diversification.
Quotes from Chinese Participants:
In China youve had the stimulus package, that really invigorated the economy. Youve had
fairly good salary rises, generally in China (China-Global-Property-Researcher2)
Because whyChina last 14 years accumulate lots of money. People accumulate, because this
last very long, from 2000 to 2015 (economic growth), very long. So people accumulate a lot of
money.(China-Local-Real-Estate-Agent)
Chinese people, you know, they have only two choices for investment: One, house; one stock
market..so you can see the past three or four years the stock market is very low Chinese
house, the price already too high..compared with properties in US, Australia or some UK house
..its good and cheap.(China-Local-Property-Consultant)
One of the key things is just that its quite hard to get a good return on capital in the China
market, the investment channels are relatively limited..youve got obviously the stock market,
which for a long time hasnt been performing, you cant interest rates or deposit deposit
rates which are relatively low, and historically theyve just been just above inflation. And real
estate investment has probably been one of the best ones, where theres actually been good
values increasing..so I think its saying, Ive got this capital, I dont know where to put it. I
cant find anywhere in China that, sort of, meets my needs in terms of my risk profile or my
180
returns on trying to generate, so sometimes they look at overseas markets (China-Global-Real-

Estate-Agent)
Participants from both Australia and China were in the opinion that Australia had emerged
internationally relevance in many aspects and was highly regarded in terms of stability and
liveability. The favourable branding messages of Australia as a country were well received by the
world community. These successful branding messages had attracted attention from foreign
investors who were assessing options of which country in the world would they invest, childrens
education or even retire eventually. The favourable branding image of Australia in terms of stability
and liveability was not limited to China but attracted the attention from the world community at
large.
It was perceived that as long as Australia continues its favourable brand image in the world, it is
anticipated that foreign investors from all over the world, not limited to China, will continue to
invest in Australian real estate. At this juncture, Chinese wealth accumulation due to Chinas
substantial economic growth for the past decades and Chinas going out policy since 1999 had
undoubtedly positioned the Chinese as the major foreign investors in Australia and the world cross-
border real estate transactions.
No, just the liveability, brand, what I would call Brand Melbourne. Melbourne has a very strong
brand, like Melbourne is recognised as being one of the most liveable cities in the world by the
economists and Monocle Magazine, anywhere. Its like always number one, two, three, most
liveable in the world; top five, always..But the brand bit, its safe alsoI think they come
together, but I think the liveability is number one.(Australia-Global-Property-Developer)
what do you get in Melbourne that you dont get in Shanghai? Alright, you get title, freehold.
You get rule of law. You get free education, free healthcare, no pollution, free, this is all free.
This is not built into a rate per square metre or anything. That makes for a very compelling
investment condition.(Australia-Global-Property-Researcher)
So Australia nowadays, we respond to world markets. We are now of international relevance,

and I think you can see that through the vast amount of capital that only comes from Asia, but
comes from other countries around the world, such as Canada, Germany, Korea..Canadian
Pension Funds are one of the largest groups that own Australian agricultural assets. (Australia-
Global-Real-Estate-Agent)
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5.2.3. Local Determinants and Overseas Drivers
Based on the interviewees responses, the performance of Australian residential properties,

especially places which experienced major capital appreciation, were increasingly influenced by
drivers associated with offshore investments. Foreign direct investment money brought into
Australia by offshore investors forms an additional source of capital and injection of funds into the
Australian residential property market. This research finding has validated the phase Two
quantitative research result that traditional leading economic factors that were relied upon heavily
in the historical assessment on property market performance such as local mortgage rate, rental
yield and Australian income per capita are becoming of diminishing significance in the Australian
residential property market. In the past, real estate market performance was shaped by domestic
wage conditions, saving rate, rental rate, tax obligation etc. Such constraints or determinants
became less relevant in the current Australian residential property market due to foreign real estate
investments. Furthermore, these foreign sources of funds invested in Australian residential property
market were structured heavily based on equity rather than debt financing and as such, were
constrained by neither overseas nor Australia domestic conditions.
..last year I dealt with 100% overseas buyers, I didnt had one local purchaser (Australia-
Local-Property-Consultant)
theyll sell as much overseas, and then theyll basically release the rest to Australia. So some
of them will take it overseas first, sell what they can, and then release it to the Melbourne
market. Because they believe that obviously their demand, higher demand is coming from
overseas.....(Australia-Local-Property-Researcher)
Have they impacted on the residential property market in Australia? Yes, of course. They are
external buyers. So, it adds to the domestic buyers, so it competes, clearly. Theyre not filling a
void..they add to the buying pressure..in the past, domestic buyers were constrained by
domestic wage conditions, and domestic savings conditions, and domestic tax
conditions..When you bring in an external influence that has a different wage, savings, and tax
regime, they can pay more..local and domestic factors especially economic facts from the
space market has little impact, or little influence on the positions to buy.(Australia-Global-
Property-Researcher)
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if you look at it and go you only need, if youve got one percent of that (China) market, you go
oh my God. We cant build enough housing for that in 10 years. So its, thats the sort of thing
that you forget about.(Australia-Local-Property-Developer)
Contrary to the traditional debt financing, interview participants perceived that residential
properties in Australia were transacted in the hands of offshore investors predominantly based on
equity financing. Some properties were in fact purchased using cash entirely and references were
made to offshore investors from China in this study. China has the highest savings rate in the world.
Lacking alternative investment options in China has pushed Chinese to explore overseas markets
seeking diversification and better investment returns. As a result, residential transactions executed
by foreign investors in Australia seldom went into default position. Historically foreign sources of
funds were predominantly heavily debt financed from the source countries and if the credit position
in the source countries suffered setbacks, these foreign funds would have exited and created
significant instability in the host market. This constituted one of the major concerns for the current
Australian residential property market and there were strong arguments that the credit crunch
would not occur due to strong equity position of these foreign funds in the Australian residential
property market.
..there are areas where, whilst the prices are escalating very steeply, its, thats not of major
concern to some Chinese. Cause the money is not the issue, its where they want to be. They
would pay twice the price just if they get the right property in the right location.(Australia-
Local-Property-Researcher)
In the past when foreigners have come here, theyve been borrowing money, cheap money at
home and just splashing it around. When the cheap money dries up at home, that money, that
debt finance money, retreats dramatically, from all around the world, and goes homethe
Chinese are not debt funded, theyre equity, 100%. There is possibly an event that could cause
the withdrawal of the capital. So it could happen, but its unlikely to be a debt event.(Australia-
Global-Property-Researcher)
But Ive never heard of anyone have an Asian-based buyer not settle. Id love to see some
analytical evidence to suggest that the Asian buyers are more likely to run away from a
settlement.. a lot of them form syndicates as well. And they get family members together to
pool together to go, theyre the ones who go and buy these huge, they spend AUD10, AUD20
million buying properties. (Australia-Local-Property-Developer)
183
I think a lot of them may be paying cash I mean, some of them are senior executives and they
received jobs bonuses, things like thatcertainly some of them may be SMEs which have, sort of,
built up, and then sold out or theyre listed or things like that. Thered be different
sources...(China-Global-Property-Agent)
My understanding is theres (in China) very little household debt, theres very little credit card
debt, theres very little financing debt on items like cars, and theres a bond and equitymy
assumptions always been a lot of equitys going intheyve got to diversity the assetsSo
theyre typically, you know, super safe, long term, secure cash flow to an A-grade tenant. You
know, they dont want any more risk than what theyre exposed to by the insurance plans, which
makes sense.(China-Global-Property-Researcher1)
So far we (China), local bank have no such kind of a policy to say, You can borrow in RMB,
purchase overseas property. I dont think so. So thats why you can say a lot of Chinese people,
they purchase a property by cash..also for the overseas bank, they probably have some kind of
requirement; you have to qualify something and then they can pay, they can provide you the
mortgage, local mortgage..so most of them prefer to pay cash. Thats what they do in
Australia. I think a lot of Chinese people, they are paying cash (China-Local-Property-
Consultant)
5.3 New Determinants

5.3.1 Education
All participants in the semi-structured interview from both international and local firms concurred
that Education in Australia played a vital role in feeding the source of foreign money purchasing
Australian residential properties. The awareness of Education as an important determinant was
common among all the participants. Reference was made to the Temporary Graduate Visa
subclass 485 issued by the Australian Government that allows students to remain in the country
after completing an Australian degree under the General Skilled Migration Programme. Hawthorne
(2010) termed this a two-step migration reflecting the situation that all international graduates
utilised the temporary graduate visa as a transition to be eventually qualified for a permanent
residency. The pathway of enrolling as a student in Australia to eventually being granted the
temporary graduate visa had allowed an international student remain in Australia for an extended
period of time after their graduation. Purchasing a residential property was a natural path during
184
this period for the original international students with the long term perspective a becoming a
permanent resident in Australia.
the significance of Australian education system in overseas investment decisions Massive,

probably the number one. (Australia-Global-Real-Estate-Agent)
(In Australia) there is short term student, health care, significant investment visa, short term,
four years usually. Welcome! They can, at the end of that, apply for citizenship. Stay or go.
(Australia-Global-Property-Researcher)
Very high, very high significance. A part of it is a foreign education is perceived as better than
a domestic education. I dont know why, because I have no knowledge of the domestic
education offering (in foreign countries). .But this certainly, if you go home with a degree
from an Australian University or an American University, well, thats a big deal (Australia-
Global-Property-Researcher).
I think education.. I think thats probably the largest driver. I think also because it was,
economically it was probably cheapest (compared to other countries tuition fees).(Local-
Property-Developer)
...and the CBDs(residential property market) probably driven initially off the back of that
education being RMIT, Melbourne Uni.(Australia-Local-Property-Researcher)
people know Melbourne is the most liveable city in the world. Thats one reason. The
education here sort of gives them the confidence that they can trust, they can have their kids live
here for many years and its worthy, its better to buy property rather than renting.. (Australia-
Local-Property-Consultant)
Balwyn in where its surrounded by very good schools, or Glen Waverley, you know, not a high
socio-economic area but has very good public schools and private schools around it, the effect of
Chinese investment into those areas is obvious. (Australia-Global-Property-Developer)
They are big attractions to Chinese students and parents would like to buy one or two
(residential properties), one for stay one for rent.when they have kids, they focus on the
education.(China-Local-Property-Consultant).
185
..from my experience with my friends, most of them chose to migrate because they want their
kids to have a different type of education..(China-Global-Consultant)
One is to get an international background, you know, international experience and thats couple
in with language communication. Two, is you know, if its a specialist course, you know, and its
like MIT or Harvard or whatever, you know, thats also a motivator. And three, maybe they were
aiming their kid to get in to ChinHua, or Fudan or wherever, but the kid doesnt have quite that
ability. They will then, you know, some of them will often sort of choose to then educate their
kid abroad(China-Global-Property-Researcher).
..I think China is more and more open and they realise that they can learn a lot of things from
the world.. If they have enough financial support they want their kids go abroad for study
(China-Local-Property-Consultant)
Education - Insights
High awareness among all the participants on Education as a determinant in Australian residential
property market was consistent with the empirical evidence. Whilst the empirical reviews had
centred on studies in migration trends in relation to higher education, this study discovered that
higher risk appetite from overseas investors recently had resulted in an emerging trend of overseas
parents sending their children to Australia in their early years for Education. This research revealed
that residential properties surrounding university, higher ranked secondary and primary school
zones in Melbourne were experiencing significant international student enrolments. This emerging
trend was validated in the semi-structured interviews conducted with Australian real estate
professionals and the factors driving Chinese parents to send children to Australia in their earlier
years were solicited in the semi-structured interviews conducted in China. Figure 5.2 demonstrates
the NVivo coverage analysis on interviewees responses:
186
Figure 5.2: Education NVivo Coverage Analysis
Secondary
Education
49.4%
Education
Tertiary Others
14.9% 36.0%
Source: Author
Based on NVivo coverage analysis, 49.4% of the interview discussions were centred on Education
as a driver from the perspective of Secondary Education in Australia. A further 36% was about other
education formats (for example primary education and short term courses) and approximately
14.9% of the interview coverage included discussion about tertiary education as the main driver.
This study revealed the insights that instead of the normal duration of tertiary courses enrolment
historically, international students were residing in Australia for a much longer period and this trend
had further incentivised overseas parents to purchase residential properties in Australia.
again the same thing happens with Balwyn. And again, isnt it interesting its so driven
around education. Theyre all in Balwyn because it means they get to the (secondary) school
zones, either they go to, they can get into good public schools or its the accessibility to good
private schools, that theyre driven (Australia-Local-Property-Developer).
Schooling is really important, parks, greenerypredominantly school zones (secondary), for

example Balwyn High, Glen Waverly High, Doncaster East Secondary Colleges they are coming
for the (secondary) schools (Australia-Local-Real-Estate-Agent).
I think for family homes secondary (China) is number one, but for tertiary, I think by the time
children get to tertiary age, well, if youre living in inner Melbourne you can get to pretty much
anything, cant you? (Australia-Global-Property-Developer)
187
Im talking about preliminary and high schools. Here we go out to about competition,
compete with lot of guys, a lot of children. (China-Global-Real-Estate-Agent)
their kids enrolled in primary schools, some even go to kindergarten or day-care centres..
(China-Global-Investment-Consultant).
Chinese parents were more inclined to send their children to Australia in their earlier years for the
following reasons:
i. Chinas education system was perceived to be rigid and lacked innovation. Students results
were based heavily on their capability to memorise and answer standardised examination
questions. Chinese parents were more inclined to provide a conducive learning environment
for their children and not purely based on examinations results
Most of them chose to migrate because they want their kids to have a different type of
education..I believe the Chinese education is more like more on examination practice
focus ..they perceived the education style in maybe US or in Australia or Canada or Europe
are geared to encourage kids to learn and to develop their own way of thinking (China-
Global-Investment-Consultant).
And its not good for the children in terms of independent thinking. They are trying to get
passed the test. So the parents are quite worried about that. And the other friend of mine, I
help him to go abroad, he go to Paraguay, close to the U.S. to invest in(China-Local-
Property-Researcher).
ii. Education institutions in China were highly competitive and held the reputation of focusing
on students academic performance. Chinese parents were increasingly reluctant to subject
their children to the highly pressurised competitive environment and perceived that
western education provides a better learning environment. Decades of single-child
policies in China had created a high degree of protectionism among parents to shelter their
children against a competitive study environment. This trend did not only occur among the
high net worth individuals or Chinese resides in the major cities. The middle class of China
and some from the western part of the country had emerged as a force to be reckoned with.
188
Now, the single child policy has focused an awful lot of energy and money and resources
into the prospects of that one. The whole family is relying on that, for their future. Because
the earnings of that one is going to come back and support the parents in old age. So theres
a big onus on the one, to do their very best. In order to do that, they need to receive the very
best, the very best education(Australia-Global-Property-Researcher).
(Investors from China) Normal families.They dont have a lot but theyre willing to
provide, offer, whatever they can (education).(Australia-Local-Property-Consultant)
And you also have to understand the number of kids which go through education system in
China and the fierceness in terms of competitive environment is extreme here. Its extreme.
(China-Global-Real-Estate-Agent)
I mean you know, the standard of education, well education in China, as you know, its
hugely competitive..mathematics in Shanghai is top around the world.. So to get away
from that sort of, I mean theres just huge pressure, I mean its pressure anywhere in terms
of exams, but in China its like huge pressure, especially at the end of high school exams,
getting in to university. Because theres pressure from parents, theres pressure from peers
and some people who are caught in that system, you know, its viewed as a make or break.
(China-Global-Property-Researcher)
Theres a big emphasis in terms of trying to give your kids the best in life. Not necessarily
through emotional connection, but by getting them the best school or getting the best this or
the best thatI dont know if theyre a feeling a little bit guilty about not spending the time,
but theyll spend the money if they want to give their kids the best chance in life.(China-
iii. Australia emerged as a strong contender in primary and secondary school education
compared to other strong education providers like the United Kingdom and the United
States of America due to restrictions imposed by those countries. The United Kingdom, as an
example, does not allow foreign nationals to enrol in public secondary schools whilst
Australia allows international student enrolment in public secondary schools. Chinese
parents view Australia as part of Asia with the same time zone, the proximity factor which
gives it the edge over other locations such as the United Kingdom.
189
Australian is the only one that you can send your kids to here at quite a young age for
education compared to Canada, America..they require minimum age of 16 or so (Australia-
Local-Property-Consultant).
why are the big developers coming to Australia..its got education, and the Chinese talk about
their first generation, so their first generation are their kids. So their first generation are the
ones now that are making money and they are looking at securing sites overseas for their kids,
for their child, and they see Australia as a good place to do that.(Australia-Global-Property-
Consultant)
Its basically the same time zone, two to three hours difference, its one flight out of Shanghai,
Hong Kong, you know Beijing, Shandu(Australia-Global-Property-Consultant).
5.3.2. Residential Tourism

5.3.2.1. The Emerging Driver Residential Tourism
Having established Education as one the factors driving foreign investment in Australian residential
property market, a more in-depth exploration was conducted in this study into other unknown
factors causing the surge of housing demand in Australia cities. The Economist magazine ranked
Melbourne the worlds most liveable city in 2015 for the fifth consecutive time (ABCNews, 2015,
Lucas, 2015). According to Lucas (2015), Australian cities were found to be a relative picture of
stability compared to other world cities surveyed by The Economists Intelligence Unit over the past
year. After Melbourne, Adelaide ranked fifth, Sydney seventh, Perth eighth and Brisbane 18th. The
rankings were the result of lifestyle challenges scores in 140 cities worldwide. This report was
used by multinational companies to determine the pay differences for employees who travel or
move overseas due to work obligations. World cities chosen were assigned a rating of relative
comfort for 30 factors across five categories: stability; healthcare; culture and environment;
education; and infrastructure. Lord Mayor of Melbourne, Robert Doyle proclaimed that the
favourable ranking for Melbourne has a huge impact on Australian tourism and education and is a
very important sale point for Melbourne to the world community (Lucas, 2015).
Research shows that all interview participants agreed that Australian cities carry a strong brand
name internationally in terms of being a tourist destination and their liveability. This brand message
and presence contributed favourably to the tourism industry in Australia. Australia enjoyed high
profile international approval ratings as a tourist destination, having hosted some of the worlds
major international sporting events such as the Formula 1 Grand Prix, Australian Grand Slam Open
190
tennis tournament and boasting ample renowned tourist attractions. Liveability was another major
aspect that caught the attention of the world community and Australian cities enjoyed high ratings
in the five categories stipulated by The Economists Intelligence Unit i.e. stability; healthcare; culture
and environment; education; and infrastructure. Foreigners who visited Australia were impressed by
the social, security and liveability the Australian citizens are enjoying including but not limited to
world class education, healthcare, social security and admirable living standards. Compared to other
world major gateway cities such as Singapore and London, this very much sought after liveability
status not only positioned Australia as a world tourist destination in the short term basis, it had
undoubtedly placed Australia as a strong contender for the world communitys choice of a place to
live and retire in the long run.
Australia has such strong branding internationally.. I think Lloyd Williams and the Crown
Casino was extremely visionary, I think Geoff Kenneth and what he did with the Grand Prix was
visionary. I think what major projects do, and Advance Victoria is visionary.I think that theres
a big attraction to the way that we live our lives, theres a big attraction to our culture, our
cultural backbone, our sporting culture, obviously or culinarytheres many world class aspects
to Melbourne(Australia-Global-Real-Estate-Agent)
Chinese people feel comfortable in Australia, theyre attracted to our lifestyle, theyre attracted
to our education system, theyre attracted to our political system, and theyre attracted to the
clean environment in which we all, you know, enjoy every day. So theyre very comfortable to
invest in Australia, and in Melbourne in particular, and theres a very strong affinity thats been
built up over a long period of time between China as a country and Melbourne as a capital city
within Australia.(Australia-Global-Real-Estate-Agent).
relationship between Melbourne as the worlds most liveable city and a tourist destination, a
direct correlation(Australia-Local-Property-Developer)
parks, greenery, the leafy streets. I think they feel its safe (in Melbourne).you know
Melbourne is again number one, the most liveable city. This gives them confidence to say, Well,
we can come here and were staying, you know, everythings around us, transport, the schools,
parks.(Australia-Local-Real-Estate-Agent).
Well that living standard..They get an awful lot for just, if they get citizenship here, they get
that property, what they get with that is far more valuable than what they would get at home..
If you want first world education, first world health, and you cant get no pollution, you cant get
191
freehold. Theres stuff that they cant get, even if they had the money, they couldnt buy it.
These are the things that are highly sought after by foreigners.(Australia-Global-Property-
Researcher)
Melbournes always been a city thats attracted big events. It probably, it started in 1956 when
we had the Melbourne Olympics. And its been a city thats been very much up there in terms of
sport. And as a consequence, I think there are some, over the years, weve done a very good job
in selling Victoria and Melbourne as a tourist location(Australia-Local-Property-Researcher)
for Australia.Its about the society, its about the weather, its about access to different
sports and the seaside, and that type of stuff.. I mean, when you talk about Australia, its about
the Australian lifestyle, its about the great outback. Think Australias much more about the
lifestyle, I would say (China-Global-Real-Estate-Agent).
(The world) major gateway cities, which are the safe, more well-known, more liquid, also and
this goes back to the sales networks here where are Chinese tourists going?.....So the drivers
for, say, residential development are, what market are you going to get returns, considering
everything going in, sitting on the platform, taxation, currency, all of those normal things; but
then the broader drivers are, is it hot for Chinese tourism, is it hot for Chinese immigration, is it
hot for Chinese education immigration?(China-Global-Property-Researcher)
..why do we want to go and migrate to overseas? ..Pollution in China is severe problem

compared to Australia.and the society is corrupted.. the society (in China) is not
stable(China-Local-Property-Researcher)
People think Australia more safe.America has more employment opportunity and universities.
Australia are more safe, and maybe better environment, better, because less people. Good
lifestyle Australiamost of the Chinese people they prefer Sydney, Melbourne city, city life..
people seeing clean and good education, good health, government social benefit and safe.
(China-Local-Real-Estate-Agent)
But if, just say we, if you want to purchase property, you will consider living environments,
climate, you know, something like that for Australia. (China-Local-Property-Consultant)
..and another of the key reasons for going overseas, obviously lifestyle, food quality, air
quality, education, health care, all these other things. (China-Global-Real-Estate-Agent)
192
Residential Tourism (RT) was not a mainstream subject for property market research compared to
other determinants such as Education and Migration. According to OReilly (2007), it had always
been difficult to have separate discussions distinctly around migration and tourism. A similar
challenge was again observed in this research. As a result of these literature reviews, the need to
strategize an effective interview approach had thus became more apparent. An added element of an
open-ended approach was incorporated outside the scope of pre-determined questionnaires to
solicit hidden observations and information surrounding the subject matter of tourism and
residential property markets in Australia. Most of the time, it was only after some in depth
discussions that the participants would come to appreciate the importance of residential tourism.
Figure 5.3 shows the NVivo coverage analysis on the significance level of RT as the key driver for
offshore investment in Australian housing market:
Figure 5.3: Residential Tourism Nvivo Coverage Analysis
Emerging
Driver
57.3%
Residential
Tourism
Major
No impact
Determinants
8.2%
14.6%
Source: Author
Figure 5.3 shows that 57.3% of the interview discussions mentioned RT as an emerging driver of the
Australian residential property market. A further 14.6% of coverage classified RT was as a major
determinant and 8.2% perceived RT as having no impact on Australian residential property market.
The balance of the coverage (19.9%) did not mention or not aware of RT as a potential driver.
Contrary to the common perception that Residential Tourists only visit Australia frequently after
they have purchased a property in Australia, studies conducted revealed that Residential Tourists,
193
who were not Australian residents but owned residential properties in Australia, visited frequently
even before they purchased the property. Due to a relatively simple visitor visa application process
and long permitted duration of stay (maximum of three months stay per entry) granted under the
tourist visa, there was neither the urgency nor the incentive for Residential Tourist to apply for long
term visa that would normally involve a more complex application and qualification process. A
substantially long duration of stay granted under the visitor visa enabled one to live much like the
locals in the world class and liveable cities, here being Melbourne and Sydney. From a Chinese
nationals perspective, visiting Australia was viewed very much like visiting to another Asian
country. Australia was not perceived as long distance travel due to its proximity to Asia. Some even
considered Australia as part of Asia, unlike other western countries such as the United States of
America or Europe which is on the other side of the globe.
They generally tend to come on look see two or three timesGenerally they come out for 12
months, they have a look around, they come and do a couple of trips, build relationships and
then they buy(Australia-Global-Property-Consultant)
Theyll be led around by like a tour leaderbecause they dont know their way around. So
someone will take them in a minivan, there might be 10 of them..And they will go and look at
specific properties..sometimes they realise theyve got X amount of dollars to spend, theyll fly
out here and theyll go yep Ill buy this(Australia-Local-Property-Developer).
You go for the visa that requires the least amount of effort. A tourist visa is an easy one, its
just, stamp, pay your moneyWhy apply for a different visa with all the hassle and paperwork
and uncertainty, when you can get a visa that meets your needs..you can leave for three
months in the school holidays and come back again(Australia-Global-Property-Researcher)
what were trying to do is, well organize tourism for foreigners. Of course, well help them to
choose several options that you can buy, meeting their criteria. So they have some material in
hand, study it a bit. And if they like, want to organize a trip, want to meet our people there, and
sign an exclusive agreement.(China-Local-Property-Researcher)
Normally, they want to be there. They kind of have something in mind with their previous
choice. We give them materials for their choice. They say, Okay, this one Im familiar with, and I
want to go therethis is if they want to help organize a tour for their kids, because normally if
194
they buy, they kind of prepare for future education for their kids(China-Local-Property-
Researcher)
I think its still very positive for all of those drivers (RT). I mean, if you look on, if we start down
at the.individual investor or buying a home down there (in Australia), its a quality of living
thats quite obvious, theres. an investment drivers because its relatively close to China(China-
Contrary to the market commentaries, an important finding in this study was that these RTs possess
a similar behaviour to an owner-occupier and they purchased houses in Australia with the long
term perspective of living in the property at some stage in the future. They were not the speculators
whose sole purpose is profiting from buying and selling properties ruthlessly. Frequent visits with a
long stay pattern were observed from these overseas investors; many acquiring property for the
purpose of housing children in order to attend educational facilities while others leased out their
property in the conventional fashion. Their behaviours were perceived no differently from
interstate migrants to Melbourne. Perhaps the sole difference was that these RTs did not occupy
the property as long as interstate migrants.
You know, these people, and we call them investors, but they are no different to owner-
occupiers and so forth as well. Theyre not speculators..and also theyre not buying it just to
leave it unoccupied, which is what the kind of myth is. Often they will buy with a view to living in
it at some stage, or their children living in it at some stage, or they will put a tenant in it, in the
traditional sense. So they are very similar to the local buyer..its a relatively new
phenomenon.(Australia-Global-Property-Developer)
We dont find that we have buildings full of no lights turned on at night for the whole year;
theyre used from time to time during the year and maybe they put a tenant in them sometimes,
and maybe they do sit vacant for part of the year as wellat some point they might come out
here and live, or their kids might come out and study or come out and live.(Australia-Global-
Property-Developer)
5.3.2.2 Residential Tourists Characteristics
In the context of what are the unique characteristics of these RTs, two major categorisations were
identified. These were consistent with the literature review conducted in Chapter 1.1.2. Sources of
Fund and Residential Property Market and Chapter 2.2.1. i.e. High Net Worth Individuals (HNWIs)
195
and Middle Class. In this phase of qualitative analysis on RT, similar groupings were applied as
below:
i. High Net Worth Individuals (HNWIs)
Obtaining a permanent residency status in Australia was not always the top priority for the HNWIs
compared the Middle Class, although some might eventually retire in Australia. In most
circumstances they were best described, as O'Reilly (2007) put it, the affluent group that turn
tourism into a way of life and construct fluid, leisure lifestyles between places. They purchased
residential properties predominantly in areas surrounding the Australia leading cities. There was a
tendency for this group of individuals to impute business sense into the residential property they
purchased in terms of both rent yield and capital appreciation; alongside with the intention of
diversification from their existing world property portfolios. This group of investors predominantly
adopted a long term view of more than 10 years, sometimes up to 30 or 40 years on the property
they purchased. They had friends and relatives who bought residential properties in Australia and
kinship with similar culture background assisted their decision of investing in Australia. From the
perspective of Chinese investors, Chinese association with Australia dates back to the 1890s gold
rush period. Evidently Melbournes China Town is the second oldest China Town in the Southern
hemisphere.
They purchased new properties (foreigners were only allowed to purchase newly built residential
properties in Australia) in Australias leading cities and adopted a care free attitude towards this
investment by either renting it out or engaging a regular caretaker to maintain the property during
their absence. As one of the interview participants put it, Fire and Forget type of properties will
best suit this group of investors. Some of this group emphasised wealth preservation for their next
generation by taking the approach of securing sites in overseas major gateways for their children,
most of the time its their only child. Figure 5.4 illustrates the phases of how HNWIs came to be in
Australia:
196
Figure 5.4: HNWIs and Residential Tourism
Tourist Where is the best place to travel?
Where is most livable? Investment

Property yield? Diversifying? Diversification
Residential Frequent Visitation

to Australia using Tourist
Tourist Visa.
PR? May
be...
Source: Author
HNWIs travelled as tourists around the world cities including Melbourne and Sydney. Their
visitations became frequent subsequent to acquisition of a property or properties in Australia. As a
result, they become RTs until one day they may become a permanent resident of Australia.
If youre really looking for a really high net worth individual, you know, they could, they could
quite happily purchase a house just by, with a nice bay view in Sydney..they would be happy to
purchase an apartment that, okay, theyve got to pay the property management fees, but
knowing that its almost like it can be like a fire and forget type of investment..they dont have
to worry about maintenance or gardening or anything like that, they can always come back to a
decent home when theyre visiting or staying in Australia.(Australia-Global-Property-
Researcher)
Well I think theres the education, and then theres the ability to use the apartment as a form of
holiday or recreation accommodation, and then theres the view that long term, they would like
to retire here. So I think its a thirty or forty year cycle, you know, and thats the way that
property investment should be looked upon.(Australia-Global-Real-Estate-Agent)
Melbourne is attractive to Chinese principally because it is affordable relative to Sydney, it has

good education, and there is a very strong cultural link to Melbourne..because we had a lot of
197
Chinese immigration for the Gold Rush, so Melbourne Chinatowns one of them.. so theres a
very strong and long cultural connection there as well.(Australia-Global-Property-Developer)
As society gets richer, then you could have this kind of, is it, in the States they call it snow
geese..where youve got the rich Jews from New York buying up property in Florida..maybe
Chinese New Year period or sort of November/December time, if they decide its a bit too cold in
China, why not take a sort of two week break down to Australia, it being obviously summer time
down there? That could be an increasing phenomenon going forward..(China-Global-
Obviously people that travelled relatively well, maybe people that have relatives already living
in overseas markets or business ties in overseas markets, so that they understand those areas, or
theyve got relatives or friends who have already bought in that market, and so theyre following
what they..only a million Australian dollars, you can buy this nice little place out in the
suburbs(China-Global-Real-Estate-Agent).
Theyre thinking about it for my kid 10 years for now, and about is it a good investment in that
10 year period..maybe stay there once or twice a year or be a holiday home, then of course
youll have a familiarity with that location, you may go visit it prior to actually purchasing..I
think its not just Chinese Nationals, but Im sure a lot of high net worth individuals .(China-
Over the last 10 years or so weve seen more Chinese people travel abroad, so theyve been
exposed to the life overseas, and theyve got a better impression of the quality of life that they
can have in certain markets and certain regions. So thats also stimulated investment
abroad(China-Global-Property-Researcher)
ii. Middle Class
Unlike HNWIs, obtaining a permanent resident status and reaping the benefits of the education
system, good living conditions were the main drivers for the Middle Class to buy into the Australian
residential property market. They had the same investment perspective as the HNWIs in terms of
projecting the potential rental yield and capital appreciation of the property they purchased, but
perhaps in a smaller degree of emphasis. In most cases they had a longer investment perspective of
30 to 40 years mainly attributable to the fact that the buying exercise was to a certain extent
emotionally motivated with the objectives of putting their children in a better environment to grow
198
up and be educated. Possibilities were that in the long run they might eventually retire and live in
Australia with their children who would most probably have graduated from the University and
settled down in Australia by then. There were undoubtedly challenges in obtaining Australian
Citizenships on an immediate basis, nevertheless, it did not seem to deter this group of individuals
from uprooting most of their wealth to Australia, for what was perceived to be a better future for
their children. During the course of their childrens education in Australia, this group typically
bought a house and became a form of Residential Tourists by using the residential property as a
base for them to visit their children frequently in Australia until one day they themselves became
Australian permanent residents, perhaps through their childrens citizenship status in Australia
eventually. Figure 5.5 illustrates the stages involved for Middle Classs evolvement in RT:
Figure 5.5: Middle Class and Residential Tourism
Where to Educate kids?

Tourist Where to live?
Where is most livable? Overseas

Property yield? Investors
Residential Frequent Visitation

Tourist to Australia using Tourist
Visa.
Education ->
PR
Source: Author
The chain processes of how Middle Class evolved into Residential Tourist was similar to the HNWIs,
except most probably they had made up their mind with their ultimate intensions of migrating to
Australia from the beginning. Middle Class typically travelled to Australia as a tourist at the
beginning. Their visitations became more frequent subsequent to the acquisition of a property or
properties in Australia. As a result, they become RTs until one day they became a permanent
resident of Australia.
199
Normal families. They dont have a lot but theyre willing to provide, offer, whatever they
can..they are really not those billionaires or millionaires.they are working in China and sent
the kids to overseas..(Australia-Local-Property-Consultant).
its purely (tourist) visit, like a tourist visa.three months but if they are that kind of visa holder
they are not allowed to buy any second hand properties. They stay(in Australia) even only for
three months visa but they have their plan already...they offered to provide all they can to the
kids. They are truly owner occupiers.. (they are from the) normal families, they dont have a lot
but theyre willing to provide..but they are really not those billionaires.(Australia-Local-
Property-Consultant).
I think Chinese people are looking thirty to forty years ahead of where they are now. So its an
education for their children and somewhere to stay, its a holiday destination because they like
Australia, theyve got family, friends and business associates here, and then one day they might
actually use it as a place to retire. (Australia-Global-Real-Estate-Agent).
So when they turn fifty or sixty, theyll still own the apartment in the city, and theyll actually
retire out in Australia, as opposed to staying in China you dont have to be hugely affluent, but
youve got to be comfortable to be able to pay for an apartment.(Australia-Global-Real-Estate-
Agent).
I mean, theres also some people that perhaps are from middle income or upper middle income,
they dont have to necessarily be high net worth individuals..Some of them can be looking at
migration, in which case, they dont necessarily need to high net worth individuals at all, they
could just be scraping in to get enough money to be able to buy a property in the overseas
market.(China-Global-Real-Estate-Agent)
Chinese cultural (regardless of wealthy or poor families) about the house, its a very key
thing in your family. If you move the family you have to own a local house. So if you move to
overseas, emigrate to Australia, Canada or something, you have to own a house there..The
Chinese, you know, they not get used to rent a house for long time; maybe in the first, well, two
years when they come to the new country they rent a house..when they decide to live there for
a long time, maybe for several generations, they want to own their own house.(China-Local-
Property-Consultant)
200
5.4 Government Policies

5.4.1 Push Factors China Government Policies
A Push & Pull Property Market model was established in this study to facilitate a structural
approach to assess the interactions and dynamic among the important drivers in property market.
Based mainly on the three market model adapted from Higgins (2010), push factors originated
from overseas depicted as Overseas Government Policies was added to incorporate potential
additional interactions exerted from overseas into Australian property market performance. As per
Figure 3.2 in Chapter Three, the model is tabulated below once again for ease of reference:
Figure 3.2: The Push & Pull Property Market Model
Push
Factors
Pull
Factors
Source: Author
Relying on this model, potential push factors exerted from overseas were explored from the semi-
structured interviews conducted in China having established investors from China who had emerged
as key players in the Australian residential property market. The semi-structured interviews adopted
an open-ended approach, at times casual in the discussions on Government policies to facilitate
effective information collection yet shunned away from potentially sensitive issues in China. With
this incitement, research on the offshore investors (particularly China) in this research had adopted
the looking from outside strategy reviewing the various China Governmental policies that had
resulted in large outward investments from China into overseas real estate markets.
From the interview participants feedback, it was unveiled that rationales behind foreign
investments of large corporations and private funds investing in Australias property market varied
across Asia Pacific countries but were all well positioned to withstand various tightening measures
and a credit crunch involving Australian financial institutions on local property development
projects. Various forms of instability, political or economic uncertainties from Asia Pacific
201
countries had directly contributed to the outflow of foreign real estate direct investments. Chinese
investors emphasised portfolio diversification out of Chinas domestic property market due to
Chinas government new going out policy since 1999 (Economist, 2009) and an underperforming
domestic residential property market.
Offshore investments in Australian property markets were not precluded to investors from China.
Singapores property market had weakened substantially recently. This was attributable to the
cooling measures imposed by Singapores Government on the residential property market.
Virtually all the listed property companies in Singapore had reported lower profits and shrinking
margins, due to high land costs, rising labour costs, falling demand, pushing many developers
offshore. Chong (2014) reported that more capital flowed out of Singapore to global real estate than
from China or Japan and about USD6.7 billion was spent in Australia by Singapore buyers, compared
with USD2.7 billion by China in 2014. Riding on the favourable exchange rates, investors from
Singapore had directed their investments into Australias residential property markets. Singapore
property developers were actively looking for alternatives to maintain their income stream by
investing in overseas markets such as Australia according to the interviewees. For example, in
Melbourne, Southbank tower, Australia 108 hotel and apartment complex were acquired by Aspial
Corporation Singapore in 2014 and 555 Collins Street was sold to Fragrance Group Singapore.
There was a significant push factor for developers coming out of Malaysia due to the severe political
instabilities relating to corruption charges against the prevailing Prime Minster, his family and many
in the Governments cabinet. A recent surge in activity observed from Malaysian investors in the
Australian residential property market was attributable mainly to racial tension, political instability
and corruption claims on the Malaysian Prime Minister and family.
(Note: As the discussion of Government policies will be best presented concurrently on both
onshore and offshores perspective, quotes from participants are separated into Australia and China
as per previous sections.)
Quotes from Participants:
The majority of our overseas clients are coming from China, Singapore, Malaysia and Hong
Kong. Theyre probably the major ones Id have to say most, 70 to, probably 80% of our clients
come from somewhere in Southeast Asia if you compared to other areas of the world.(Australia-
In Singapore the cooling measures that were implied or applied to development in Singapore,
from 2012 until recently, and that really slowed the market down and made it difficult for
202
developers to do new projects, they were looking for alternatives, such as Australia 108
project.. 555 Collins Street that we sold to Fragrance Group .. we saw a huge level of interest
spike from Singaporean developers.(Australia-Global-Real-Estate-Agent)
in the same year we saw the emergence of groups like UEM, who are a Malaysian developer.
There was a big push for developers coming out of Malaysia because of corruption claims with
the government, and political instability..theres actually a common theme in all three of those
countries, and that common theme is instability.(Australia-Global-Real-Estate-Agent)
5.4.1.1 Sources of Push Factors Wealth Accumulation and China One-Child Policy
The following Sections strive to provide the insights from the data gathered from the interview
participants in relation to major determinants that drove Chinese investment outwards to the rest
of the world. Although the primary data (interview transcripts) gathered from the participants
serves well as the lead to major push factors, interview data gathered are lacking in depth
especially in terms of the relevant background information and fundamentals evolving around their
exertions. In order to provide a better understanding of the China push factors, this section is
supported with an additional literature review and fact finding including the recent political and
economic developments in China.
Two decades of substantial economic growth had undoubtedly contributed to the massive wealth
creation in China as a country and in its population at large. Recent economic stimulus measures
reacting to GFC 2008 had further fuelled the already heated market. According to the participants,
as a result of the economic growth and economic stimulus packages China State Owned Enterprises,
corporate entities down to individuals were financially benefited and approximately 10 million
millionaires were reported created as a result of this economic event. Corporate entities and
individual residents in China were hungry for investment options either for wealth preservation or
mere diversification. This investment sentiment had emerged as a common theme across the entire
country as their wealth continues to escalate.
Because whyChina last 14 years accumulate lots of money. People accumulate, because this
last very long, from 2000 to 2015, very long. So people accumulate a lot of money.(China-Local-
Real-Estate-Agent)
In China youve had the stimulus package, that really invigorated the economy..that has been
sort of pushed actually by State owned enterprises out to wider parts of the economy because
203
they probably felt that they had a better investment return investing in other parts of the
economy, rather than investing in their own business. .(China-Global-Property-Researcher1)
Some of that money has, you know, gone, found its way in to the pockets of individuals.....Now
before they put it in to residential housing in China, because it was a performing market. But
over the last two years, because of the cooling measures, it hasnt been a performing market so
they looked at other markets elsewhere. And you know, theyve decided on markets like
Australia.(China-Global-Property-Researcher1)
if you look at the insurance companies since 2002, theyve essentially been let off the leash to
invest up to 15% of their assets in overseas real estate.(China-Global-Property-Researcher)
Among the investment options available for China investors, the residential property market had
always been the favourite according to the interview participants. Insights were provided by the
interviewees that due to a relatively low rental yield and high mortgage rates, local Chinese invested
in residential property set capital gains as the main objective. Equity markets in China did not
receive much attention from the investment community due to their muted performance compared
to property markets. Commercial properties attracted significantly higher capital gain taxes at
approximately 50% compared to residential properties at 10%. Only a handful of offices and retail
properties provided a satisfactory yield compared to the mortgage rate of approximately 6%
towards the middle of year 2015. These factors had contributed to the significant increase in
residential property prices in the major cities. Until recently Chinese authorities sanctioned various
cooling measures targeted at tempering the overheating residential property market. Naturally,
Chinese looked abroad for viable investment opportunities. This constitutes the creation phase of
the sources of push factor i.e. wealth creation in China.
There is also a problem in commercial, retail and office property, the tax. If you buy them, say
residential property, you go one hundred percent appreciation and sell it. Then the tax will be like
ten percent, maybe ten percent, raw. If that situation applies to office or retail, then it goes to
fifty percent of your added value.(China-Local-Property-Researcher)
..(rental return) around two, two percent..two is only a rental and the Chinese borrowing
rate is around six to seven....yes, residential. In Shanghai, the land is quite limited. ..because
they rely on (residential property) capital gain.five hundred percent (growth in
Shanghai).(China-Local-Property-Researcher)
204
..first stage definitely buy residential. Maybe second stage, third stage, I dont know, but
first stage is definitely buying residential.(China-Real-Estate-Agent)
So theres those more technical investors who will go to a market where they can get the
returns, and then theres those who, again, simply want to diversity and they want to see trophy
assets in gateway cities.(China-Global-Researcher2)
Chaturvedi (2015) explained Chinese households tend to save more cash and potentially earning
higher interest rates on their deposits compared to the western world. Figure 5.6 compares Chinas
gross saving rate as a share of GDP with the rest of the world:
Figure 5.6: Gross Saving Rate as A Share Of GDP
Source: World Bank 2013
Figure 5.6 shows Chinas saving rate according to World Bank data 2013 was only behind Kuwait and
Bermuda. Savings rates are higher in Asia (with the exception of Japan) relative to Europe. The U.S.
and Brazil have the lowest savings rates among major economies.
Chinese residents purchasing residential properties had gone beyond sole purpose of acquiring
shelter. It was a norm in China that instead of saving money in the banks earning interest, of which
China saving rate is currently one of the highest in the world, the resident treated investment in
residential properties as part of their traditional saving plan. Subsequent to a revolutionary law
enactment in 2007 strengthening private property rights for individuals and companies, purchasing
205
additional residential properties became a commonly accepted habit of Chinese residents (The
Economist, 2007).
Adjunct to the investment world, there lies the unique past one-child policy in China. The one-
child policy had impacted the social fabric and economics of China. It was believed that this policy
had contributed significantly to the wealth creation in China in the 21st century. Figure 5.7
illustrates the wealth accumulation 1 + 1 = 2 phenomenon in China:
Figure 5.7: China 1 + 1 = 2 Wealth Accumulation Phenomenon
Source: Author
A new event had emerged in this decade that had accelerated the wealth creation in Chinese
society. Insights provided by the interview process had shed light onto a major socio-economic
event in China, i.e. wealth transfer to the one-child policy generation. Accumulation of wealth had
moved onto a level not seen before as Chinese residents became more affluent due to decades of
economic growth. The one-child policy had shaped the community towards focusing resources
and energy into the prospects of the one-child in the family. Subsequent to the one-child policy
was enforced in 1980s, decades of hard work and wealth accumulations from the first generation of
these single-children were commonly observed in China. Currently China is filled with the second
generation of one-child. When these second generation of one-child were married; the
accumulated wealth of these two first generation of one-child families were naturally passed
down and merged in the hands of these second generation one-child married couple. With the
206
fact the China is currently the most populated nation in the world, the impact of this wealth creation
is simply remarkable. As at October 2015 this one-child policy has officially ended in China. It is
noteworthy that this study records this historical wealth creation event in China as the 1 + 1 = 2
phenomenon.
Now, the single child policy has focused an awful lot of energy and money and resources into
the prospects of that one. The whole family is relying on that, for their future. Because the
earnings of that one are going to come back and support the parents in old age. Well, the
greatest transfer of wealth in the history of mankind happened when the Chinese government
gave everybody their house, 1996(Australia-Global-Property-Researcher)
So you invest a lot into your kids (in China)..there's a big emphasis in terms of trying to give
your kids the best in life. Not necessarily through emotional connection, but by getting them the
best school or getting the best this or the best that.(China-Global-Property-Agent).
..the way that the whole family is actually, sort of, structured in China is the kids should be
looked after by their grandparents..they'll spend the money if they want to give their kids the
best chance in life..(China-Global-Property-Agent)
..their kids for their study plus in China the parents want to bring the best of things to their
kidsSo if they realise, okay, the education or the environment or something there, overseas
better than China, they want to bring, send their children overseas.(China-Local-Property-
Consultant)
Australias lean, its green, its clean, its got food security, its got education, and the Chinese
talk about their first generation, so their first generation are their kids. So their first generation
are the ones now that are making money and they are looking at securing sites overseas for their
kids..and they see Australia as a good place to do that. (Australia-Global-Property-
Consultant).
5.4.1.2 Primary Push Factors and China Going-Out Policy
Due to the substantial economic growth and the economic stimulus packages, house prices in China
especially in the major cities, experienced significant price increases until recently when Chinese
authorities sanctioned various cooling measures targeted at the overheating residential property
market. One of the cooling measures involved restricting the number of residential properties one
can purchase in China especially in the major cities, to only one. In places where Chinese residents
207
were permitted to purchase more than one residential property, restrictions were imposed on the
second and third houses by increased stamp duties, increased lending costs and reduced lending
margins. Already faced with limited investment options in China, wealthy Chinese were seeking
alternative investments as part of their on-going savings plan due to the perceived
underperformed local residential property markets. Alongside with the world greatest liberalization
era and transparent information technology age, Chinese residents were exposed to the
international arena as never before. Investing in overseas residential property markets had emerged
as a viable option.
Now, if youve got your house unencumbered, and youve been busy saving for a rainy day, then
youre sitting there saying, well, Im restricted in what I can purchase here..cant buy more
than three..wont put it into the share market, cant buy bonds. Im not going to put it in the
bank. So, what does my advisor say? Oh, an apartment in Melbourne.(Australia-Global-
Property-Consultant)
..in Shanghai, Beijing and even within larger cities, you can buy one but no more.(China-
Oh yeah, number one son, Universitybecause it (China residential property market) was
heated and the Government put restrictions on second housing and third housing, increased
stamp duty, increased loan costs and things like that. All theyve got to do is ease it a little bit
and then that creates more demand.(Australia-Global-Property-Consultant)
.secondly is the China property market is not so well at the moment. For us Chinese property
market are not going wellThat is like five years ago (performing well), okay. Recent year is not
well as before.(China-Local-Real-Estate-Agent)
One other motivation for that is you know, over the last 10 years or so weve seen more
Chinese people travel abroad, so theyve been exposed to the life overseas..So thats also
stimulated investment abroad..and youve got all these property websites that advertise
residential housing, so you dont need to actually go to Australia.(China-Global-Property-
Researher1)
Yeah, the (first) house you purchased (in Shanghai), you probably could get 70% mortgage, but
the second only 15%. But they still allow you to purchase, but the third house you have to pay
fully (in cash).(China-Local-Property-Consultant)
208
In Shanghai, you buy residential house, its very limited. You can buy one or two, you couldnt
buy more. But in the other situation you need help and they move out from there(Australia-
One of the major push factors identified was Chinese investors had emphasized portfolio
diversification out of Chinas domestic property market due to China government new going-out
policy since 1999. The going-out policy had successfully accelerated Chinas Outward FDI and the
country was ranked as one of the worlds largest exporters of capital (Davies, 2013). Figure 5.9
illustrates Chinas Outward FDI for the period 1990 to 2010:
Figure 5.8: China Outward Foreign Direct Investment (USD Billion)
Source: OECD 2013
Outward FDI flows had grown steadily since 2002, and then more than doubling between 2007 and
2008 when Chinese investors took advantage of their superior financial position during GFC 2008 to
seize competitive advantages against business competitors in developed nations. China (including
Hong Kong) ranked second in largest Outward FDI source in 2010 with 10% of the world total and
fourth in 2011, with 7%. In December 2012, in spite of ongoing assumptions of a Chinese economic
slowdown, China recorded its highest levels of outward FDI ever at USD77.2 billion, up 28.5% from
USD60.1 billion in 2011. The figure for non-financial outward investment was estimated to reach
USD1 trillion by 2020. According to estimates given by the Ministry of Commerce China, by 2010, in
excess of 13,000 Chinese investing entities had set-up around 16,000 enterprises abroad in 178
countries and regions (Maxxelli Consulting, 2013).
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Investment outflow resulting from the Going-out policy were sectorally and geographically
diversified. Outward FDI was no longer limited to state-owned enterprises but extended to the
private sector. The level of non-financial (assets with physical value such as real estate or
equipment) investment abroad generally remained steady at roughly USD2 billion per year
throughout the 1990s. It was not until 1999 that the going out policy was officially adopted after
which the level of external Chinese investment grew substantially. The main reasons cited for the
going-out policy are:
i. Due to a significant amount of foreign currency reserves accumulated for the past decades,
China needed to alleviate this upward pressure against the exchange rate of the Renminbi
(RMB). Potential threats were envisaged to Chinas share market and real estate in terms of
speculation due to excessive liquidity. The Chinese government redirected the excess capital
away by offering incentives (such as preferential tax policies) to domestic companies who
invested abroad.
ii. In order to equip Chinese companies and investors with the required expertise and
technology comparable with advanced countries, the Chinese government encouraged its
citizens and companies to engage in business operations in advanced nations. Business
competitiveness in China had escalated and labour costs continued to rise, there was a need
to ensure domestic companies possessed adequate knowledge to remain competitive.
iii. Ownership in businesses abroad would help promote Chinas products to a large world
consumer base as a long term strategy to increase Chinas economic and cultural impact
across the globe.
iv. Growing internal pressure from wealthy (and powerful) Chinese investors had played a role
in influencing the decision to approve international asset diversification. In an age where
Chinas upper class was growing and the income inequality is decreasing, many of the
wealthy Chinese elite were sceptical as to whether they would continue to accumulate
wealth purely from investing in their own country.
Source: Maxxelli 2013
The going out policies were the major contributor to push factors on Chinas aggressive outward
foreign investments since 2000. Previous Chinese law allowed Chinese residents to convert
USD50,000 worth of Renminbi to foreign currency annually although in reality investors had
exploited various loopholes to move money offshore. In May 2015, Wildau (2015) reported that
China was finalising plans to allow individuals to invest directly in overseas financial assets, further
loosening capital controls as it sought official reserve currency status for the RMB. The latest move
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would enable Chinese individuals to buy overseas stocks, bonds and real estate directly rather than
pick from a handful of Government-approved foreign mutual funds as they were obliged to. An
economist from China International Capital Corp estimated that if this Qualified Domestic Individual
Investor programme, or QDII2, were expanded nationwide, it would theoretically free up about
RMB41 trillion (or USD 6.5 trillion) in domestic wealth for overseas investment. Easing controls on
outbound financial investment will help the RMB meet International Monetary Fund requirements
that any official reserve currency be freely usable.
The government policy..encourage the people to invest in overseas. Chinese Shanghai city
governor a few days (ago) announced a new policy to try to encourage people to invest
overseasWhy? ..Chinese currency should become global currency..the China government
encourage people to invest overseas(China-Local-Property-Researcher)
If the money stays(in China), and is forced to stay, then it just keeps fuelling higher prices,
because it cant get out..if youre going to restrict what people can invest in, you create
imbalances, those imbalances are not healthy. That means that no one can afford to live in
Shanghai, they cant get workers in there, because they cant live there. They need workers, so
they need to provide enough accommodationAgain, theyve got their own problems with
demand exceeding supply in their first-tier cities. The issue is, okay, weve got to take some of
that money that would be going into those first-tier cities and let it out into the
world.(Australia-Global-Property-Researcher)
Now is, I wont say (China Government) encourage but they are quite comfortable in people
invest money overseasThey want us investing overseas.China Government not encourage but
they are not strict as before. Okay. So people can send their money to overseas.(China-Local-
Real-Estate-Agent)
that has been sort of pushed actually by State owned enterprises out to wider parts of the
economy because they probably felt that they had a better investment return investing in other
parts of the economy, rather than investing in their own business.(China-Global-Property-
Researcher1)
So if you look at the insurance companies since 2002, theyve essentially been let off the leash
to invest up to 15% of their assets in overseas and youre talking 800 million dollars, 800 million
pounds in London Ping An Real Estate...theyre (China Authority) supportive, yeah,
absolutely.(China-Global-Property-Researcher2)
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I think money is too much; they want to change it, US dollar or something like that. So thats
why you can see a lot of Chinese company going overseas. Thats actually the government
encourage to do some overseas investment, to transfer the RMB to overseas. Thats why they
say in recent years that Chinese government will study when and how the RMB relationship to
international currency. (China-Local-Property-Consultant)
Were also seeing some Chinese buyers actually moving to peripheral markets as well. I mean
take Europe for example..because of the global financial crisis, youve seen some property
markets really plunge, like Spain, Greece, and Portugal.(China-Global-Property-Researcher1)
5.4.1.3 Secondary Push Factors The Major Capital Deflector Trend
Choices of overseas investments from China Outward FDI were not limited to Australia. According to
Ernst & Young China (2015), in 2014 Chinese investors invested in 6,128 overseas companies across
156 countries and regions. Chinas outward FDI outflow was ranked third in the world for the third
consecutive year with a total of USD116 billion in 2014 and USD 100 billion in 2013, up 15.5% on a
year-on-year basis. Out of the total Outward FDI from China, 58% went to Hong Kong China and
12.8% went to Virgin Island and Cayman Island. Hong Kong China is part of China with a different
administrative system, and the Outward FDI to Virgin Islands and Cayman Islands had discoloured
China Outward FDI to a certain degree, according to the OECD. Out of the total USD116 billion
Outward FDI from China in 2013, approximately USD 33.9 billion (or 29.2%) went to other parts of
the world which was still considered sizable and significant. Figure 5.10 shows China Outward FDI
top destinations from 2009 to 2013 that excludes Hong Kong, Cayman Island and Virgin Islands:
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Figure 5.9: China Outward FDI Top Destinations (USD million)
Source: Ministry of Commerce China; adopted by Ernst & Young
Excluding Hong Kong, Cayman Islands and Virgin Islands, Australia ranked the second highest
beneficiary of China outward FDI after United States received more than USD 35 billion in 2013.
Singapore descended from the top recipient in 2011 to the third position in 2013. The main
attractions cited for these top destinations includes stable political and social environments, sound
legal and regulatory systems, successful market system, and leading competence in science and
technology and education. Chinas investments in Australian fixed assets and real estate contributed
to more than 10% of the total China Outward FDI in 2013 and undeniably Australia was one of the
favourite destinations for Chinas money. In reality, the total China Outward FDI to Australia could
have been larger if not for exploitation by some investors on various loopholes to move money
offshore from China. Based on these official statistics and projections, strong basis was established
for the projection that Chinese will invest approximately AUD 44billion into Australian residential
property market over next seven years (Janda, 2014) and more than a projected AUD 5 billion a year
(Mason, 2014).
With the transformation and strengthening of the Chinese economy and the development of
Chinese enterprises, the objective of investment had shifted from acquiring production factors such
as resources to acquiring advanced technology and brands. This shift in focus was aimed at
increasing the international competitiveness of Chinese companies and meeting the changing
domestic consumption behaviour. Driven by this shift, the investment destinations for China are
becoming increasingly diversified, as Chinese companies are expanding into the developed countries
213
in Europe and America rather than the resource-based economies in Asia, Africa and Latin America
(Ernst & YoungChina, 2015).
Australia falls into the category of resource commodity base countries. China Outward FDI to
Australia was not heavily reported in the form of major merger and acquisition exercises as in
United States. Some of the high profile merger and acquisition exercises reported by media were
Lenovos acquisition of IBMs x86 server business, Motorolas mobility business at USD2.1 billion and
USD2.91 billion respectively. Alibaba Group listed on the NYSE and set the record as the largest IPO
ever in the US stock markets In September 2014. The most recent reported China Outward FDI
activities in Australia includes the AUD463 million deal Sheraton On the Park Hotel Sydney by
Sunshine Insurance China and Wanda Group purchased Gold Fields House in Sydney for AUD415
million. Evidently Australia did not attract China Outward FDI in the area of major mergers and
acquisitions of high profile advanced technology and brands, the real estate sector had instead
attracted substantial interest from China investors.
Having established that majority of the China Outward FDI in Australia was vested in real estate,
reasons for China investors selected Australia instead of other part of the world were further
explored in the semi-structured interviews. The semi-structured interviews conducted had provided
some insights as to the choices of investing in Australia over other countries. The main reason seems
to be very much related to some unfavourable Government policies imposed by competitor
countries. It was concluded that although the original investment destinations were in other
countries and not in Australia, due to their unfavourable Government policies on foreign
investments, Chinese investors had chosen to invest in Australia eventually. This second wave of
offshore investments in Australia was a deflection effect of capital flow originally targeted not for
Australia, however at end landed in Australia. It was believed that this capital deflection effect
had contributed to Australias emergence as the second largest beneficiary country, even though
Australia did not feature the much sought after advanced technology and brands like United States.
This significant global effect on capital flow from China is termed as The Capital Deflector effect
reflecting a new market trend that might had just resulted in one of the biggest capital divergence in
the world real estate cross-border transactions. The significance of this Capital Deflector effect
had potentially resulted in residential property in Sydney and Melbourne experienced the largest
price escalation ever in the history of Australia. Figure 5.10 illustrates some examples of the Capital
Deflector Effect of China Outward FDI:
214
Figure 5.10: Capital Deflector Effect
Source: Author
Figure 5.10 illustrates the Deflector Effect that resulted in Australias emergence as the second
largest recipient of China Outward FDI after United States. Money from China was deflected away
due to the Government policies of:
i. Canada: In February 2014 Canada abolished their Immigrant Investor Scheme. This investor
scheme originally granted citizenship to the applicants who had a net worth of CAD1.6
million and invested CAD400,000 in Canada. Towards the end of 2014, the original
Immigrant Investor Scheme was replaced by a new immigrant scheme allowing applicants
who demonstrate a legally obtained net worth of at least CAD10 million derived from lawful,
profit-making business activities, which will be verified by a designated due diligence service
provider. Only applicants selected for processing will be required to obtain a due diligence
report from a designated service provider. The applicants have to make a CAD2 million non-
guaranteed investment for 15 years into the Immigrant Investor Venture Capital fund. These
funds will be invested in innovative Canadian-based start-ups with high growth potential.
The new measure involved elimination of the long-standing backlog of applications
amounting to more than 65,000 people, most of whom are Chinese resulted in negative
impression on Canada government trustworthiness (Watt, 2014).
ii. Singapore: Singapores property market had weakened substantially recently attributable to
the cooling measures imposed by Singapore government on residential property market.
215
The cooling measures include lower Loan-To-Value for borrowings and higher buyer and
seller stamp duties (15%). Many China investors were affected by the downturn on the
residential property market and shied away from the restrictions imposed against foreign
buyers in the republics residential properties.
iii. United Kingdom: A mansion tax was originally proposed in 2009 and subsequently in 2012
as a common name for an annual property tax on high value homes. The most commonly
cited trigger point would be a property value of 2 million. Introduction of the Mansion Tax
had undoubtedly increased the cost of owning a property in United Kingdom.
The total quantum of the Deflector Effect is not known and it will be challenging to ascertain how
much China money had been deflected to Australia out of the total China Outward FDI. It was
through the interview process structured based on the Push & Pull Property Market model that
this deflector effect was discovered as a major push factor for China Outward FDI in Australian
real estate market.
It (China outward FDI) goes to Hong Kong and SingaporeHong Kong, the people in Hong Kong
are going, oh my god, theres not enough apartments for us all, we cant live here anymore. ..
weve got to stop the Chinese. So they stopped them, theyve put barriers in place. (Australia-
Singaporeans did the same. And so have other places around the world. We call it
Mercantilism, its just putting up barriers to tradeThe Canadians, they were letting them in,
hand over fist, and then all of a sudden said, oh, oh, oh, no, no, no, thats enough. The UK were
looking at a mansion taxthere are barriers being put up, all around the world to this flow of
capital.(Australia-Global-Property-Researcher)
..Singapore, I think in 2010 they put down some restrictions on foreign buyers, raising the
stamp duty to about 15 percent, so that sort of kind of pushed out some of those foreign buyers.
..It hasnt, but if those restrictive policies werent put in place, I think you would get a lot more
Chinese buyers going in to the Singaporean market.(China-Global-Property-Researcher2)
Sometimes they apply everything (permanent residency) together but actually Australia is a
little bit easier than CanadaUSbut the hardest is in Europe. If you want to immigrate to UK,
it will be very difficult... Because for some of our friends that went to Canada and because they
have experience and they sometimes measure, that now Canada is very hard, almost impossible.
But Australia has some possibility.(China-Global-Investment-Consultant)
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Like Hong Kong Shanghai Bank, for example, the money never leaves China, it stays in China.
But Hong Kong Shanghai Bank will give you a mortgage on that deposit in any currency you like
anywhere else in the world. The money stays in China. So, from the Chinese point of view, the
moneys stayed, it hasnt left.(Australia-Global-Property-Researcher)
5.4.2 Pull Factors Australian Government Policies
In the eyes of global real estate investors, Australia stood out as one of the most investor friendly
nations with the Government policies not as stringent or restrictive as other developed nations.
Favourable Australian Government policies and the resultant conducive investing environment were
extensively discussed among the interviewees as below:
i. Favourable Residential Real Estate Market Conditions: It is the Government's policy that
foreign investment in Residential Real Estate should increase Australia's housing stock. That
is, the policy seeks to channel foreign investment in the housing sector into activity that
directly increases the supply of new housing (such as new developments of house and land,
home units and townhouses) and brings benefits to the local building industry and its
suppliers. All Residential Real Estate applications are considered in light of this overarching
principle. Although there were some restrictions on foreign buying, compared to other
developed western nations these restrictions were considered friendly. Overseas investors
were allowed to purchase both new and existing residential properties, provided the latter
obtained an approval from FIRB. One major favourite feature was the foreigners were
allowed to possess freehold title on the residential property they purchased, contrary to no
freehold title for all residential properties in China.
If they (foreign investors) need to pay, they just need to pay a dollar more than the local buyer,
to purchase (residential property). They dont have to pay much more, they dont have to pay
double. Theres no special taxes, or prohibitions, theres no stamp duty penalties, or anything
like that. They just have to pay a dollar more. For overseas buyers, it looks particularly
attractive.(Australia-Global-Property-Researcher)
Some of them will have an appetite to buy Australian property because they, one they can own
it. They actually have a tittle to the propertyWhereas I understand in the likes of China you
dont actually get a title, yeah. You get the right to use it but you actually dont own
it.(Australia-Local-Property-Researcher)
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ii. Immigration Policies. Australia has one of the most comprehensive immigration policies
among the developed nations. Decades of immigration friendly policies had successfully
boosted, sustained and fostered Australian social and economy conditions as it is today.
Among the favourable immigration policies, three major immigration policies stood out in
the eyes of the overseas investors:
a. Graduate Visas: The Temporary Graduate visa (subclass 485) lets an applicant live, study
and work in Australia temporarily after finishing studies. Graduate Work stream is for
international students with an eligible qualification who graduate with skills and
qualifications that relate to an occupation on the Skilled Occupation List (SOL). A visa in
this stream is granted for 18 months from the date of grant. Post Study Work stream
for international students who graduate with a higher education degree from an
Australian education provider, regardless of their field of study. This stream is only
available to students who applied for, and were granted, their first student visa to
Australia on or after 5 November 2011. A visa in this stream can be granted for up to
four years from the date the visa is granted, depending on the visa applicant's
qualification.
b. Skilled Migrants: The skill stream of Australia's Migration Programme is specifically
designed to target migrants who have skills or outstanding abilities that will contribute
to the Australian economy. The migration to Australia of skilled people with the
qualifications and attributes to succeed helps address specific skill shortages in Australia
and enhances the size and skill level of the Australian labour force. The 201011 skill
stream outcome of 113,725 places accounted for 67 per cent of the total Migration
Programme. The planning level for the skill stream Migration Programme was set at
125,850 or 68 per cent of the total 20112012 Migration Programme. The planning level
for the skill stream of the 2012-2013 Migration Programme is 129,250 places, which also
represents 68 per cent of the total Migration Programme.
c. Business Innovation and Significant Investor Stream (Visa subclass 188 and 888):
Similar to Canadas Immigrant Investor Scheme, Visa subclass 188 and 888 allow high
net worth individuals to become a permanent resident in Australia by owning and
managing a new or existing business in Australia, or to invest in Australia
(AUD1.5million, AUD5million and AUD15million) in the form of designated investment in
a state or territory government security using unencumbered fund.
Source: Department of Immigration and Citizenship Australia 2015
218
theyd be coming here with visas to live here, and theyre buying, buy the land to build or old
homes to knock down and build within two years, or theyre buying new property. But the visa
was the 188 visa or something; theres a lot of that coming in.(Australia-Local-Real-Estate-
Agent)
Three types. Three types of buyer. Residents, coming here to live. Have successfully applied,
and received migration status, thats it. They come here, buy a house, live like the rest of
usThere is short term student, health care, significant investment visa. Short term, four years,
usually. Welcome. They can, at the end of that, apply for citizenship.(Australia-Global-
Migrants who had studied here, had a degree who can, you know, eligible to apply visa, do PR,
like young professionals, accountants or yeah young professionals, Id say yeah they will invest
on our kind of product or even an investment, it could their first home and stay in smaller kind of
properties because what they can, yeah thats just a start.(Australia-Local-Property-Consultant)
iii. Social Security and Liveability: One of the main attractions for overseas investors investing
in Australia was due to its stability and social liveability. Outward investments, for example,
were due to existence of instabilities in China in living conditions and social instabilities.
These favourable branding messages of Australia as a country were well received by the
world community and this constitute on the main focus in this study. It was perceived that
as long as Australia continues its favourable brand presence, it is anticipated that foreign
investors from all over the world, not limited to China, will continue to invest in Australia
real estate market.
I think what the Melbourne City Council have done in terms of addressing crime in the CBD and
making it a safer place for people to walk the streets, the installation of CCTV, the regulation of
drunkenness behaviour, the introduction of more police style people on our train system at night
I think thats gone a long way to restore confidence, and really has lifted Melbourne to an elite
city within Australia.(Australian-Global-Property-Agent)
if China, for some reason or other says, or implements policies that make it, people more
nervous about a government may be changing some rules and regulations, they might say I want
219
to push some of my money offshore so they cant get it from meI think they love the fact that
theres no corruption here.(Australian-Local-Property-Developer)
It's about the society, it's about the weather, it's about access to different sports and the
seaside, and that type of stuff. There's always some people that go there for the
education..when you talk about Australia, it's about the Australian lifestyle, it's about the great
outback - the message that you get - it's about that.(China-Global-Real-Estate-Agent)
5.5 Discussion and Summary
The objective of qualitative research executed was to solicit validations and in-sights on the new
determinants discovered in the quantitative research phase. A series of semi-structured interviews
were conducted both locally and overseas to seek the latest market information and conditions to
justify the findings that Australian residential property market was increasingly influenced by
overseas conditions and Residential Tourism had emerged as a new driver that should be taken into
account for future evaluation of Australian residential property market.
Australian property as an investment portfolio is becoming increasingly visible to the world

investment community. Although the focus on this study was on Chinese investors, all participants
agreed that investors from other Asia Pacific countries were equally interested in Australias real
estate. Australia had emerged internationally relevant in many aspects and highly ranked in terms of
stability and liveability. The brand presence of Australia as a safe and liveable country was to a large
extent, similar to big international brands like Apple or Mercedes, in that it commanded high
respect and premium status compared to other parts of the world. It was believed that as long as
Australia continues its favourable brand image internationally, foreign investors from all over the
world, not just China, will continue to invest in Australian residential property market. Traditional
leading economic factors such as saving rates, income per capita and local mortgage rates had
become less significant in determining the performance of Australian residential property market
now that foreign source of funds as another key determinant were structured not based on local
factors. This certainly had established a new dimension to the property market.
In order to enable a comprehensive coverage of the interviews, major determinant like Education
would need to be included as part of the interview questionnaires together with other factors.
Education had been classified as one of the main driver for Australian property market in past
empirical studies and it was again validated in this study with all the participants agreed that
Education remained a major driver for Australian residential property market. Similar to
(Hawthorne, 2010)s two-step migration, Australian immigration policies played a significant role in
220
boosting the attractiveness of Education among international students by allowing them to remain
in Australia after graduating from their tertiary education in Australia.
In the qualitative study phase, a new trend was discovered in the aspect of Education as a historical
key driver. Students with the family originated offshore were found enrolling in the earlier years of
education in Australia, namely into the primary and secondary school levels compared to the
traditionally practice of enrolling only at tertiary stage. As a result, residential properties
surrounding higher ranked secondary and primary school zones in Australia experienced substantial
growth recently.
Residential Tourism, as a new driver in Australian residential property market, was overwhelmingly
validated in the semi-structured interviews conducted. As mentioned in earlier Sections, Australian
cities were internationally renowned for its relative picture of stability in terms of society,
healthcare, culture and environment, education and infrastructure. The Residential Tourists in
Australia demonstrated unique characteristics and were identifiable by two major groupings:
i. High Net Worth Individuals (HNWIs) this group of foreign investors may not position
permanent residency as their top priority. They consist of affluent foreign investors who
turned tourism into a way of life and live a fluid, leisure lifestyle between major gateway
cities in the world. They purchased residential properties in Australia with the objective of
enjoying Australias favourable living conditions as tourists and imputed business sense in
the assets they purchased by earning the rental yield and capital returns.
ii. Middle class contrary to the HNWIs, reaping the benefit of a good education, securing
good living conditions for their children and eventually obtaining permanent residency
status were among the top priorities of this group of investors. There existed a special
emotional value in their investment in Australian residential property market with the
objective of placing their children in a better environment to grow and be educated. With
the ultimate intention of getting a permanent residency in Australia, this group of investors
began by travelling to Australia as tourists and then their visitations to Australia became a
repetitive affair after their childrens enrolment into Australia colleges.
Assessment on Government policies, both onshore and offshore, was proven a challenging phase of
the research both in terms of sensitivity and complexity nature of the topic. Guided by the Push &
pull model of this study, an open-ended approach was adopted in the interviews to solicit an in-
depth coverage of the issues while carefully avoiding any potentially sensitive elements.
221
In studies conducted in China, it was observed that significant wealth was created and accumulated
among the Chinese due to both substantial economic growth and the social economic impact of the
one-child policy. Though the one-child policy has officially ended recently and since been
replaced by a two-child policy in China, this study presented the unique 1 + 1 = 2 phenomenon
in China that had impacted all aspects of the Chinese society for the past decades. Wealth
experienced a doubled-up effect due to both the creation and accumulation in the first
generations which was then passed down to the second generations of the one-child policy,
merging into high wealth liquidity among the Chinese families, ready to be invested both locally and
internationally.
As the Chinese residential property market was underperforming due to the various cooling
measures implemented by its Government, wealthy Chinese were constrained in the investment
options locally and looked for viable assets overseas. China going-out policy since 1999 had
further fuelled the momentum for Chinese to invest in overseas markets. Whilst the State Owned
Enterprises and private entities from China were actively engaged in international merger and
acquisition exercises, wealthy Chinese private investors pursued the world property market. In the
wave of China substantial investment in offshore market, Australia emerged as the second highest
recipients of this Outward FDI in 2014.
Venturing into offshore investments by these China private investors was not entirely a smooth
sailing affair. Chinese investors faced investment barriers, as some interviewees proclaimed, from
the intended investment destinations and as a result, Chinese investors channelled their money
away from these destinations. It was due to some unfavourable Government policies on foreign
investments in some of these initially targeted destinations that China investors had later chosen to
invest in Australia instead. This second wave of offshore investments in Australia constituted the
deflection effects of capital flow originally not targeted for Australia, but eventually landed in
Australia. It was believe that this capital deflection effect had contributed to Australias
emergence as the second largest beneficiary country. This significant global effect on capital flow
from China is termed as The Capital Deflector effect reflecting a new market trend that might had
just resulted in one of the biggest capital divergence in the world real estate cross-border
transactions.
Although Australia was regarded more of a commodity based nation and less known in the field of
advanced technology and brand names compared to the United States and Europe, Australia must
be credited with its investors friendly policies and its high standards of living over many developed
nations. Among all other drivers, these were the major pull factors that attracted overseas
222
Chinese investors besides the primary push factor or the Deflector Effect. Among the favourable
Australian government policies that were perceived positively by foreign investors were the
proactive immigration policies. Figure 5.11 shows the pictorial representation of Australian
residential property market model simulated based on the major push factors from offshore
Government policies, coupled with the significant pull factors from Australian Government
policies and the resultant interactions of Property, Space and Capital Market determinants:
Figure 5.11: New Australian Residential Property Market Model
Source: Author
Current Australian residential property market performance is uniquely shaped by both foreign
Government policies and Australian Government policies as depicted in Figure 5.11. Current
evaluation measures on Australian residential property market performance are perceived
inadequate being based primarily upon domestic conditions and drivers. It was undoubtedly
Australian Government policies in the area of foreign investment, immigration and social security
benefits which had provided the much needed foundation for a favourable investing environment.
As the world is becoming increasingly transparent fuelled with globalisation and advancement in
information technologies, these favourable drivers were fast acted upon by global real estate
investors sweeping on cross border real estate transactions in Australia. Chinas investors were the
subject of a case study in this assessment which saw the impacts of one-child social policy and
going-out policy that had pushed China investors actively pursuing cross border real estate
223
investments. The global Deflector Effect had further encouraged the flow of China investors
money into the Australian residential property market.
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Chapter 6:
Summary, Conclusions and Recommendations
6.1 Introduction
The purpose of this research was to explore and identify emerging drivers that impacted the AUD5.7
trillion Australian residential property markets. This research aimed to investigate the rationales
behind the recent active offshore private investment in Australian residential property market
subsequent to GFC 2008, even though the conventional economic indicators in Australia remained
stalled (for example the mining industry). Much was reported that foreign investors were the key
reason fuelling demand pressures in Australia cities residential property markets; in fact they were,
in a way, blamed for causing the declining housing affordability in Australias major cities. In order to
assess the extent to which this external pressure exerted from foreign investors had on Australias
residential property market, conventional economic indicators were compared with indicators
associated with overseas investments. Apart from the traditional economic indicators, new
emerging determinants that had driven the recent robust performance were identified. The
research attempted an in depth approach based on a Push & Pull model formulated in this study
to assess the impact of Government policies stemming from both onshore and offshore factors on
Australian residential property markets. Phase one was a literature review. Phases two and three
involved data collection and analysis. Phase four unveiled the key onshore and offshore government
policies that impacted the Australian residential property market performance. This chapter
summarised the key findings from the literature review, quantitative analysis and the results of
qualitative semi-structured interviews.
The entire research was executed based on the research design tabulated in Chapter Three, Table
3.1 Research Design Model and hereby retabulated as below:
Table 3.1 Research Objectives and Approaches
Research Objectives Approaches

I To identify the major determinants, both historical and Stage One:
emerging, in the Australian residential property market Introduction
Literature Review
II To explore the fundamentals of foreign cross-border real
estate investment and the related influential Government
policies, both onshore and offshore
To identify and design assessment models that facilitates Stage Two:
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the research execution and analysis Modelling
III To reveal the dynamics of Overseas Real Estate Stage Three:

Investments in Australia and the significance of these Quantitative
offshore investments shaping the local housing market Analysis of
Secondary Data
To validate and provide insights on the relationship and Stage Four:

validity of the new market determinants have on Qualitative
Australian residential property markets Analysis of
IV To reveal the key government policies, both onshore and Structured
offshore, that had driven foreign investors into Australian Interviews Data
residential property markets.
Final Research outcomes discussion and conclusion Stage Five:

Discussion and
Implementation
Source: Author
Chapter One introduced the research by detailing information on international cross-border real
estate transactions. A research background was established with the research objectives, scope and
limitations of the research identified. In Chapter Two, the research reviewed the empirical studies
on the history of the intertwined relationship between migration, foreign Investment and residential
property market performance in Australia. An existing major driver of migration, i.e. Education was
evaluated and a new determinant, Residential Tourism was identified. The latest migration trends
were studied as the backdrop of the emergence of High Net Worth Individuals (HNWIs) and Middle
Class and their increasing influence over world real estate market transactions. All these were
reviewed alongside both onshore and offshore Government policies and their roles in influencing
the influx of foreign money into the Australian residential property market. Chapter Three outlined
the research approach and design. Chapter Four provided the analysis and results of the
quantitative research. Qualitative research analysis and results were tabulated in Chapter Five. The
objective of qualitative research was to solicit validations and in-sights on the new determinants
discovered in the quantitative research phase.
The remaining sections in this chapter provide summary, conclusions for the research aims and
objectives, contributions to the body of knowledge and recommendations for future study areas.
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6.2 Summary
As illustrated in Table 3.1, the research design intended to address four broad research objectives
and one final discussion executed in five stages of research operation. The associated methods of
investigation were tabulated according to the stages of execution. As per research questions
established in Chapter 1 section 1.3, the conclusions of the research would directly reflect the
objectives achieved, or otherwise, and be summarized as follows:
6.2.1 Objectives I and II: Historical and Emerging Determinants

To identify the major determinants, both historical and emerging, in the Australian
residential property market
To explore the fundamentals of foreign cross-border real estate investment and the
related influential Government policies, both onshore and offshore.
Savills (2014) estimated that direct-owned residential properties contributed a total of USD180
trillion or approximately 72% of the world properties value, of which only approximately 17%
belonged to commercial properties. The residential property market in Australia was valued at
AUD5.7 trillion with the housing mortgage market stood at AUD1.4 trillion in 2015 (CoreLogic, 2015).
In 2014, the issuance of RMBS (Residential Mortgage Backed Securities) hit AUD32 billion, its highest
level since GFC 2008. In the midst of the significant growth in the residential property market in
Australia, house prices in both Sydney and Melbourne continued to escalate and rose by 12.2% and
4.5% respectively in 2014. More often than not, media blamed foreign investors, especially
individual investors from China for driving the house prices out of local home owners reach.
Australia continued to be in the spot light among the international investment community and
ranked seventh in 2012 and ninth in 2013 as the world top Foreign Direct Investment (FDI)
destination country; attracting USD57 billion in 2012 and USD50 billion in 2013. As per Chapter 1
Section 1.1.3, active participation of foreign investors in Australian residential property market was
a common sight subsequent to GFC 2008. According to a survey conducted by National Australia
Bank in 2015, foreign buyers were active in Australian new housing markets with 15.6% of all sales
transacted into the hands of foreign buyers. Foreign buyers involvement reached the height of 21%
in NSW and 20.7% in Victoria (NAB, 2015). Janda (2014) predicted that Chinese investors and newly
arrived migrants would be investing approximately AUD44 billion into Australias residential real
estate market over the next seven years. The Credit Suisse report noted that buying is concentrated
in Australias two largest cities, namely Sydney and Melbourne.
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World Subsequent to GFC 2008
Subsequent to GFC 2008, there were four emerging trends that might have changed the world of
real estate investments:
i. Funds emanating from the Asia Pacific region were actively pursuing world cross border real
estate transactions and this was on a rising trend (Capgemini, 2015a).
ii. Asia Pacific private funds from High Net Worth Individuals (HNWIs) seeking residential
property investments in major world gateway cities (Savills, 2014)
iii. The global income distribution gaps were narrowing due to the emergence of the Expanding
Middle Class (Ernst&Young, 2013, Kharas, 2010, TheEconomist, 2011, Wilson, 2008).
Expanding Middle Class from Asia Pacific countries was believed to have impacted global
spending patterns in a significant manner and potentially played a significant role in foreign
real estate investments (FREI) (Wilson, 2008)
iv. The institutional real estate transactions had never really recovered since 2008 due to the
credit crunch (Savills, 2014)
The emergence of the HNWIs and Middle Class from Asia Pacific had shifted the world real estate
market into an entirely new paradigm. According to Savills (2014), Capgemini (2015b), (Wilson,
2008), affluent and middle class private investors from Asia would soon replace the United States as
the largest investor group in global consumption and investment. This newly emerged group of
investors is expected to exert impact on the global real estate market in both corporate and private
segments significantly. This latest development was believed to have given birth to a structural
change in the world real estate market, i.e. private individuals had emerged as a force to be
reckoned with in the world gateway cities residential properties.
Traditional and Emerging Determinants
Previous built environment literature examined various factors driving the residential property
market in Australia. The relationship between population, migration and demand of housing was
much discussed in the context of acquisitions by new migrants for owner occupying purposes.
Literature reviews had provided empirical evidence on Australias population being affected by
immigration programmes historically and immigration had always been the major source of
Australias population growth since the era of white settlement (Burnley et al., 1998, Collins, 2008,
Department of Immigration and Citizenship, 2009-2010, Jupp, 1995, Wilson, 1998). The increase in
immigration activities in the host countries had also directly impacted real estate market from a
macroeconomic perspective (Borjas, 1994, Collins, 2008, Wilson, 1998). For example, studies by
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Borjas (1994) and Ley and Tutchener (2001) had established that immigrations played a significant
role in lifting the host countries FDI. Both Farrell (1997) and Murphy and Watson (1994) revealed
that among all the properties purchased by the offshore investors, residential housing had attracted
much attention and constituted an important element in shaping Australian overall real estate
market development. In recent studies, (Commonwealth Bank, 2014) reported that the population
growth in Australia was mainly attributable to the increased level of skilled migrant intake who were
typically cash rich when they arrived and their contribution to the housing market was sooner than
many unskilled migrants.
Review of literatures revealed the apparent lacking of empirical studies on migrants objective of
buying residential houses for purpose other than owners occupation. Studies had not addressed
some of the complexities that had arisen over the past couple of decades. The majority of the
discovered evidence had made a common presumption, i.e. that the immigrants had been
purchasing residential properties for owner occupation purposes without further exploring other
aspects such as investment, life style, tourism or education. Thus a potential knowledge gap arises.
One of these complexities had been the rapid expansion of Australias international student
population. This trend was in its infancy during the early 1990s, but by 2010, Australia had emerged
as a leading exporter of education services. As at June 2014, Australia was host to over 500,000
international students, with a significant proportion of these students contemplating migration at
the conclusion of their studies. Some offshore investors had come to Australia as students but
carrying with them the primary intention of attaining permanent residency status. It was envisaged
that this emerging trend would develop into a vital element that would shape Australias
relationships with emerging countries within the Asia-Pacific region, in particular with the populous
nations of China and India (Dwyer et al., 2010). Education, as a major component of the Australian
service industry, had overtaken iron ore as Australia biggest foreign exchange income source. Its
role in the current Australian economic environment was becoming even more important in the
midst of the Governments effort of moving away from heavy reliance on resources based
development (Creswell and Clark, 2007).
There were clearly some unidentified and unusual factors at work which contributed to the increase
in housing demand in Australia in relation to foreign investors (Commonwealth Bank, 2014). The
conventional investment theory and law of demand and supply was perceived inadequate to
substantiate the reasons for offshore investors preference in Australia residential properties over
other parts of the world. Having established that Education was one of the factors driving foreign
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investment in Australian residential property market, the desire for a more extensive research into
other possibly yet to be identified factors causing the surge of housing demand in Australia cities
had gained momentum.
Though tourism and migration relationships were extensively documented in the earlier reports, the
studies did not explore further some of the complexities that have arisen over the past couple of
decades. This thesis investigated an existing European tourism migration trend that closely
resembled the social development in Australia. This unique social development in Europe posted a
direct resemblance to Australias current tourism migration patterns. The definition of residential
tourists specifically distinguished this group as the affluent residential property investors. This group
was able to treat tourism as a way of life and to construct fluid, leisure lifestyles between places.
They were also being characterised as tourists who had ostensibly tried to settle in, but remained in
some ways outside or away from the community they moved into. An observation by O'Reilly (2007)
was similar to that of Savills (2014) who reported that among the cross-border transactions, private
capital played a major role which observed Chinese buyers seeking property for their offspring
(often bases for students/children to study), or to ultimately attain permanent residency. According
to O'Reilly (2007), it had always been difficult to disentangle migration and tourism in Europe. The
unique interaction between tourism and migration was defined as Residential Tourism.
Review of literatures underscored tourism activity as a stimulus for migration and migration as an
inducement to tourism flows (Williams and Hall, 2000). A model proposed by Williams and Hall
(2002) depicting such relationships was explored in the context of a geographical extension of
friendship, ethnic and kinship networks. Empirical studies had identified the strong link between
VFR traffic and migration. Be it domestic or international, migration was a precondition for VFR
tourism, although the connection may be indirect when the sense of dependence is based on the
migration behaviour of prior generations (Dwyer et al., 1993, Dwyer, 2010, King, 1994, Williams and
Hall, 2002). Dwyer et al. (1993) suggested that VFR tourism was an important element of what they
called chain migration. A review of the literature validated that permanent migration and tourism
were connected and that the links extend from both directions. Tourism could generate permanent
migration, and in turn, permanent migration could generate a demand for tourism, particularly for
the purpose of visiting friends and relatives (Burnley et al., 1998, King, 1994, Dwyer et al., 1993,
Dwyer, 2010, Huong and King, 2002, Murphy and Watson, 1994, O'Reilly, 2007, Wilson, 1998).
Whilst such interdependencies were not new, their scale, intensity and geographical scope had
significantly expanded over recent decades.
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Complexity was further escalated when considering the various motives for short-term travel
(including visiting friends and relatives, leisure and business travel) and long-term migration. This
was further complicated by the addition of new sources of migration including that from the
troubled areas or countries such as the Horn of Africa, Afghanistan and Iraq (Boyne et al., 2002).
According to Michael Pezzullo, Secretary of the Department of Immigration, as many as 1.9 million
foreigners would likely to be in the country at any one time over the period 2015. In terms of new
migrants to Australia, the number of Chinese born Australians had more than tripled to almost
450,000 in the space of two decades. Those born in India had risen more than fourfold to almost
400,000. The findings are consistent with Capgemini (2015), Kharas (2010) and Wilson (2008) claims
that countries from Asia Pacific, particularly China and India, would contribute significantly to the
world middle class and HNWIs.
Building on the literature, the focus of this study was to determine whether there is historical
evidence, in a world cities context, to support the existence of a direct relationship between
overseas private investors and the residential housing markets performance. The research selected
Chinese investors for case studies due to the significance of funds flowing from China. A detailed
analysis of recent Australian immigration policies was essential to examine the impacts these
policies had on the Chinese investors and the resultant determinants of Australian residential
housing performance. The empirical evidence developed from this study will assist policy makers in
making informed decisions to promote FDI in the real estate market yet maintain the affordability of
housing in Australia for local residents. The aim of this study is also to yield findings that can assist
property market operators and investors in their evaluation of the Australian residential housing
market and be better informed in their decision making process.
World Real Estate Market
According to Palin (2014) the traditional investment portfolios of a mixture of equity and fixed
interest were either too volatile or providing too low a return with much weighting towards bonds.
In the midst of an era of world trade and economic globalisation and liberalisation, the trend was
that many governments offered quantitative easing (QE) policies after the shock of the GFC 2008
and these scenarios were ascribed the responsibility for the volatility in equity and the low yield in
bond investments. Global investors were then seeking alternative investments as a replacement or
hedge against their existing portfolios in equity and bond markets. As a result, global real estate
markets gained significant attention from the world investment community due to their relatively
stable risk profile and quality returns (McDermott, 2013). D'Arcy (2009), Topintzi et al. (2008) and
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UNCTAD (2011) reported that foreign direct investment in real estate markets had experienced
significant growth in many countries. Evidently, cross border foreign real estate Investments was on
the rise in this global liberalization era (D'Arcy, 2009, Topintzi et al., 2008, UNCTAD, 2009, UNCTAD,
2013).
Real estate assets offer an investment category to investors with opportunities for diversification in
this world of uncertainty. Following the growth of real estate in global investment portfolios, many
real estate options including listed real estate securities had been made available to investors. These
are listed vehicles which can be publicly traded and have real estate as the underlying asset. While
real estate investment activities gained momentum and cross border foreign real estate investments
were being well supported by easily accessible information attributed to the advancement in
information technologies, there had been an apparent surge in Foreign Real Estate Investment
(FREI) in many countries in recent years.
At the time when international investment communities were hungry for alternatives, real estate
assets emerged as a strong contender providing an apparent option for portfolio diversification, its
increasing level of liquidity and superior return relative to Bonds. Of all available real estate asset
sub-classes, residential property was undeniably the largest according to Savills (2014). In more
recent research, real estate assets were added to a mixture of asset portfolios comprising shares
and bonds. An improvement in the risk-adjusted performance of the portfolio was observed as a
consequence of the addition of real estate to the portfolio (Hoesli et al., 2004), (Moshirian and
Pham, 1999, Sirmans and Worzala, 2003).
Although there had been numerous economic reports (for example: Ross (2011), Bourassa and
Hendershott (1995)) on the impact of offshore investors on the local real estate market, a literature
review showed that there had not been real tangible studies conducted on the factors that resulted
in an increasing offshore investments in the Australian residential property market. The recent
offshore investors substantial investments in both Melbourne and Sydney residential housing
markets certainly signalled an imminent need to investigate the causes of these Chinese cross
border investment influxes. Limited and dated information was identified by Commonwealth Bank
(2014) as a real concern. Information seemed limited with regard to the relationship between
overseas investors and the dynamics of the Australian housing market.
Government Policies
Many Governments in developed countries have new regulations to attract offshore capital. This has
increased the participation from both institutions and private entities adding momentum to global
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investment activities for those investors seeking better returns offshore than those which can be
achieved locally. As Fereidouni and Tajul Ariffin (2013) explained, the world Governments economic
and financial policies cover interest rates, physical infrastructure, FDI in other sectors, labour costs,
exchange rate risks, property prices and tourism agglomeration were all relevant in the assessment
of cross border investments in the real estate markets of host economies. It is a challenging task for
any Government to balance its effort to attract FREI while maintaining the affordability of residential
properties, particularly in the capital cities. A paper entitled Determinants of US Investment in Real
Estate Abroad by Moshirian and Pham (1999) presented the opposite perspective of foreign
investments in a real estate market by analysing factors which were contributing to the outward
investments of US FDI in real estate overseas. They conducted study on various attributes that
caused US investors to invest money into real estate market overseas. As a result of US fiscal and
monetary policies, there was an increase in real estate investment abroad as a substitute for
investing in US financial assets when US foreign financial liabilities increase. The empirical results
indicated that as returns from the US stock market declined, there were more incentives for US
investors to invest in foreign real estate.
Factors attributable to China investing in overseas included: a highly competitive domestic market;
declining corporate revenues; government policies and financial support for enterprises venturing
into new overseas markets; securing raw material supplies; and acquiring advanced technology and
global brands (Cheng and Ma, 2010). Deng (2004) revealed that with Chinas sustainable high
economic rate of growth, China not only had substantial foreign capital inflows but also a big current
account surplus, huge foreign reserves, and a high level of domestic savings. The large FDI outflows
were primarily a function of macroeconomic factors and economic development in its stages, the
world would continue to see ever increasing FDI from Chinese multinational corporations in the
foreseeable future.
Australias migrant intake policies changed after the recession in the early 1990s. In recent decades,
immigration has been somewhat less sensitive to the business cycle (as evidenced by increasing
numbers even during the Global Financial Crisis) and more responsive to economic restructuring.
Evidently the long migration boom from the mid-1990s was caused by the relaxation of migration
quotas, as a result of various government policies restructuring. Australian migration policies had
increasingly favoured younger applicants with tertiary qualifications and strong language skills
purportedly to satisfy the demand in the labour market. Skilled migration has increased relative to
family-based migration. The share of family intakes fell from 47.2% in 199899 to 40.1% in 200102
while the skilled intake rose from 51.5% to 57.5% (DIAC, 2004).
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The growth of migration was symptomatic of the Howard Coalition Governments attempt to extract
greater economic benefit from migration to garner public support for the programme. A trend had
emerged whereby the investors friendly migration scheme was put in place to attract significant
foreign capital into the local real estate market in Australia. Burnley et al. (1998) presented his study
on various Governmental policy implications on urban outcomes in relation to Australias
immigration programme. Australian policy makers recognized the divergent views on the costs and
benefits to the nations major cities such as Sydney and Melbourne of large scale immigration; and
responses had since intensified and sharpened.
Higgins (2010) demonstrated the extent of Government policies impacts on the Australian housing
market by examining the structure of the property market. In another study, Archer and Ling (1997)
adopted a three-market model which was based upon exemplifying the critical relationships
between Property, Space and Capital Markets and to assess the extent of the influence Australian
government policies had over the house prices (Higgins, 2010). Based on the literature review of
potential influences of both local and offshore Government policies had over the investment
climate, it was believed that an additional platform should be introduced into the Higgins model to
enable an in depth review of FDI (real estate) determinants. This new model would allow a more
comprehensive coverage on how both overseas and local Government policies were impacting the
host countrys real estate market as shown in Figure 3.2, the proposed Push & Pull model in this
study.
6.2.2 Objective III: Dynamics of Overseas Investments

To reveal the dynamics of Overseas Real Estate Investments in Australia and the significance
of these offshore investments shaping the local housing market.
To validate and provide insights that the relationship and validity of the new market
determinants have on Australian residential property markets
Quantitative Analysis
In the Quantitative phase of the research, analysis was performed on the Melbourne Metropolitan
residential property market and two suburbs in Melbourne that had successfully attracted the
largest or most significant number of overseas settlers historically by comparing a decade of ABS
census data between 2001 and 2011. Three statistical analysis were applied to analyse the strength
of the relationship between the DV (House Prices) and IV (Australian Leading Economic Indicators,
Non-traditional factor) to confirm the validity of the model, namely:
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i. Correlation Matrix Pearson Correlation Coefficient (R) this methodology was applied to
analyse the nature and relationship between the key economic factors of Australia (IV) and
the house prices of the selected area of interest (DV). To determine whether individual
correlation coefficients are significantly different from zero, a t test at the 95% and 99%
confidence level was applied to the correlation results.
ii. Multiple Linear Stepwise Regression - to fit a linear regression line using ordinary least
squares method. This method is used to model the relationship between the predictor
(House Prices) and dependant variables (indicators from Space, Capital and Property
Markets), explained by a linear, or straight line, relationship. The single regression equation
to assess the correlations between the house prices and various independent variables can
be expressed as:
Regression Model Equations
(MELBOURNE
METROPROLITAN HOUSE = (Space datasets -,) + (Capital datasets -,
PRICE MOVEMENT) ) + (Property datasets -,...)
(SELECTED SUBURBS
HOUSE PRICE MOVEMENT) = (Space datasets -) + (Capital datasets -
,) + (Property datasets -,..)
iii. Descriptive Analysis to provide summaries on the secondary data collected from various
sources with with simple graphics analysis. This analysis forms the essential basis of the
quantitative research in this study.
The economic indicators were re-entered using lagged data methodology depicted as Lagged
Economic Indicators. As changes in macroeconomic activity may take time to affect residential
property market performance, the two-year lag provides sufficient time for the assumed property
and macroeconomic activity to flow onto the residential property performance.
The above quantitative techniques were used to first explore the existence of significant relationship
between the Australian leading economic indicators and the median house prices in Melbourne
Metropolitan, Clayton and Doncaster. Two non-traditional factors, namely Residential Tourism (RT)
and International Student Enrolments (Education) were introduced to explore their respective
interaction with traditional leading economic indicators in property investment (Property Market)
and funding risk components (Space Market) from the general capital market (Capital Market) based
on the Higgins (2010) three-market model. The correlation and regression equations were tested for
statistical reliability and visually examined for projection of actual performance.
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The final results of Correlation analysis were tabulated in Figure 4.29. Economic Indicators Ranking
According to r-value (Including RT). Economic indicators associated with overseas investors namely
10-Year Government Bond Yield and Foreign Exchange Rate ranked the highest at above 0.6 r-value
in Clayton, above 0.7 r-value in Melbourne Metropolitan, above 0.6 for Doncaster, surpassing the
significance level of traditional indicators such as mortgage rates, GDP per capita and rent yield. Net
Overseas Migration (NOM) had emerged as the third most significantly correlated indicator in the
Clayton property market. (This was consistent with the finding that Clayton attracted the most
overseas settlers in Victoria (ABS 2014)).
International Student Enrolments in Victoria ranked high in Clayton, with moderate significance level
in Melbourne Metropolitan and Doncaster. Residential Tourism (RT) represented by Long Term
Visitor Arrivals (LTVA) and Short Term Visitor Arrivals in Victoria (STVAV), was statistically
significantly correlated in all residential property markets at the 0.01 level (2-tailed); suggesting RT
was a relatively strong social economic indicator in all property markets. RT ranked higher than
some traditional indicators such as GDP per Capita, Population Growth, Net Saving and Rent Growth
in terms of significance level in the three property markets.
Stepwise multiple regression analysis was employed to present the complex interactions among all
the leading economic variables in an effort to provide an acceptable econometric model
representing future house prices in all three locations. The application of stepwise multiple
regressions on the lagged significant leading economic variables against the house prices
incorporated the non-traditional social economic factor i.e. RT and Education in the second model
simulation for comparison. The fitted regression equations were presented in Table 4.30, Table 4.32
and Table 4.34. The validated forecasting models were graphed in Figure 4.9 Models Comparison
with the Actual Melbourne House Prices, Figure 4.10 Models Comparison with the Actual Clayton
House Prices and Figure 4.11 Models Comparison with the Actual Doncaster House Prices.
The adequacy of the equations was reflected in the high R readings (above 90%) and the
significant t-values for every economic variable. Notably there had been an improvement in the R
readings in the second model for all the property markets after the inclusion of the non-traditional
factors of Residential Tourism (RT). The effect of RT, as a new determinant of house prices, had
improved the accuracy of the fitted regression line and its significance was particularly noticeable
towards the latter part of the data series. The new fitted line with the RT element had moved the
fitted line closer to the actual house price Indices starting from year 2013 till the end of the time
series. The house prices surge observed towards the latter part of the time series, which was unable
to be modeled relying on traditional economic indicators, was partly explained in this new equation
by incorporating a new determinant of RT. Although International Student Enrolments was reflected
236
as significant in the correlation analysis, it failed to qualifiy as a major determinant in the forecasting
models.
Quantitative analysis of secondary data had successfully provided three forecasting models for
Melbourne Metropolitan, Clayton and Doncaster residential property markets. Among the
traditional economic indicators, factors associated with offshore investments had shown sign of
surpassing factors associated with domestic economic factors. For example, 10-year Government
Bond Yields (10Bond), Foreign Currency Exchange (Forex) and Net Overseas Migrations were
significantly correlated and formed the crucial components of the regression equations and
correlation matrix; surpassed the importance of other traditional residential market determinants
such as rent growth, GDP per capital growth and net saving rates. RT was established as a new key
driver and the inclusion of this new determinant in the regression equations improved the forecast
accuracy of the house prices in Melbourne Metropolitan and Clayton subsequent to the GFC 2008.
Qualitative Analysis
The objective of qualitative research executed was to solicit validations and in-sights on the new
determinants discovered in the quantitative research phase. A series of semi-structured interviews
was conducted both locally and overseas (China) to seek the latest market information and
conditions to justify the findings that Australian residential property markets were increasingly
influenced by overseas conditions and that Residential Tourism had emerged as a new driver that
should be taken into account for future evaluation of the Australian residential property market.
Validation 1: Drivers from Overseas Market
All participants agreed that investors from other Asia Pacific countries were largely interested in
Australian real estate. Australia had emerged internationally relevant in many aspects and highly
ranked in terms of stability and liveability. The brand presence of Australia as a safe and liveable
country was to a certain extent, similar to big international brands like Apple or Mercedes, that
command high respect and a premium compared to other parts of the world. It was believed that as
long as Australia continued its favourable brand image internationally, foreign investors from all
over the world, not just China, would continue to invest in the Australian residential property
market. Traditional leading economic indicators such as savings rate, income per capita and local
mortgage rate were becoming less significant in determining the performance of residential
properties in some locations in Australia, especially those which experienced a significant price
increase since GFC 2008. These local factors had little, if any influence over the structure of foreign
source of funds which had exerted a new dimension to the property market.
237
Validation 2: International Student Enrolments (Education)
Education had been classified as one of the main drivers of Australian property market in past
empirical studies and it was again validated in this study with all the participants agreeing that
Education remained a major driver for the Australian residential property market. Similar to
Hawthorne (2010)s two-step migration, Australian immigration policies played a significant role in
boosting Education attractiveness among the international students by allowing students to remain
in Australia after their graduation from higher Tertiary education in Australia.
Validation 3: Residential Tourism
Residential Tourism, as a new driver in the Australian residential property market, was
overwhelmingly validated in the semi-structured interviews conducted. Australian cities were
internationally renowned for their relative picture of stability in terms of security, healthcare,
culture and environment, education and infrastructure. The Economists Intelligence Unit ranked
Melbourne the world most liveable city in 2015 for the fifth consecutive time (ABCNews, 2015,
Lucas, 2015). Research showed that all interview participants agreed that Australian cities carried a
strong brand name internationally as a tourist destination as well as in terms of their liveability
status. Foreigners who visited Australia were impressed by the quality of life that the Australian
citizens were enjoying including but not limited to world class education, healthcare, security and
admirable living standards. Compared to other world major gateway cities such as Singapore and
London, this very much sought after liveability status had not only positioned Australia as the world
tourist destination in the short term basis, it had undoubtedly placed Australia as a strong contender
for the world communitys choice of a place to live and retire in the long run.
Insight 1: Early Education In Australia
A new trend was discovered with regards to Education as a crucial driver. Non-domestic families
with younger children were found to be starting their earlier years of education in Australia, by
enrolling into primary and secondary school compared to the traditional practice of coming to
Australia for tertiary education. As a result, residential properties surrounding higher ranked
secondary and primary school zones in Australia have experienced above-trend growth.
Insight 2: Residential Tourists Characteristics
The Residential Tourists in Australia demonstrated unique characteristics and are categorized by two
major groupings:
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i. High Net Worth Individuals (HNWIs) this group of foreign investors did not position
permanent residency as their top priority. They consisted of affluent foreign investors who
treated tourism as a way of life and conducted a fluid, leisure lifestyle between major
gateway cities in the world. They purchased residential properties in Australia with the
primary objective of enjoying Australias favourable living conditions as tourists and along
the way, leasing out their assets in a conventional manner, reaping both rental yield and
capital returns.
ii. Middle class contrary to the HNWIs, enjoying the benefit of a good education, securing
favourable living conditions for their children and eventually obtaining permanent residency
status were the top priorities of this group of investors. There existed a special emotional
value underlying their investment in Australian residential property which stemmed from
the objective of placing their kids in a better environment to grow and be educated. With
the ultimate intention of attaining permanent residency in Australia, this group of investors
would travel to Australia as tourists in the beginning and soon after, their visitations would
become more frequent as their children attended Australian educational facilities. Figure 6.1
illustrates the characteristics and decision making process for both HNWIs and Expanding
Middle Residential Tourists:
Figure 6.1: Residential Tourist Characteristics and Decision Making Process
Source: Author
239
Figure 6.1 demonstrates the different characteristics and decision making processes of HNWIs and
the Expanding Middle Class. HNWIs emphasized investment diversification and wealth preservation
for their investment in overseas markets. More likely than not those in the Middle Class would have
made up their mind to eventually migrate to Australia if they purchased an overseas property for
their childrens education at the outset.
6.2.3 Objective IV: Key Onshore and Offshore Government Policies

To reveal the key Government policies, both onshore and offshore, that had driven foreign
investors into the Australian residential property market.
Assessment of Government policies, both onshore and offshore, was proving to be a challenging
phase of the research both in terms of the sensitivity and complexity surrounding the issue. Guided
by the Push & pull model of this study, an open-ended approach was adopted in the interview
process to solicit in-depth coverage of the subject, yet tactfully avoid the sensitive elements.
Push Factors
Various forms of instability mainly from the aspect of political or economic uncertainties from Asia
Pacific countries had directly contributed to the outflow of foreign real estate direct investments.
Investors from China are not the only offshore investors in the Australian property markets. Chong
(2014) reported that more capital exited Singapore to global real estate than that from China or
Japan. An estimated USD6.7bn was spent in Australia by buyers from Singapore in 2014, compared
to USD2.7bn from China, attributable to the cooling measures imposed by the Singapore
Government on its residential property market resulting in the weakening of its residential property
market performance. Another observation was the recent surge in activities from Malaysian
investors in the Australian residential property market attributable to the countrys escalating racial
tension and political instability following the corruption claims against the Malaysia Prime Minister
and its Government at large.
Insights 1: China 1 + 1 = 2 Phenomenon
Significant wealth was created among Chinese residents due to both the countrys substantial
economic growth and the implementation of its socio-economic one-child policy. As the one-
child policy had been recently officially ended and was being replaced by a two-child policy in
China, this study presented the unique 1 + 1 = 2 phenomenon in China that had impacted the
fundamentals of both the social fabric and the economy of China for the past decades. Wealth
creation and accumulation experienced a doubled-up effect in the second generation of Chinas
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one-child policy, mainly due to the wealth created in the first generation having flowed down to the
second generation when they setup their own households. This trend had led to enormous wealth
liquidity among young Chinese families, available to be invested both locally and internationally.
241
Insight 2: China going-out Policy
Chinas going-out policy since 1999 had further fuelled the momentum for Chinese to invest in
overseas markets. Whilst the State Owned Enterprises and private entities from China were actively
engaged in international merger and acquisition exercises, wealthy Chinese private investors
pursued the world property market. In the wave of Chinese substantial investment in offshore
markets, Australia emerged as the second highest recipient of this Outward FDI in 2014.
Insight 3: Secondary Push Factor: Capital Deflector Trend
Chinese investors faced investment barriers, as some interviewees proclaimed, from the originally
intended investment destinations and as a result, they channelled their money away from these
destinations. It was due to some unfavourable Government policies on foreign investment in these
destinations that China investors had chosen to invest in Australia instead. This second wave of
offshore investments in Australia constituted the deflection effects of capital flow that may have
originally been targeted elsewhere, but landed in Australia instead. It was believed that this capital
deflection effect had contributed to Australias emergence as the second largest beneficiary
country. This significant global effect on capital flow from China is termed Capital Deflector effect,
reflecting a new market trend that might have just become one of the biggest capital divergence
scenarios in the in the history of world real estate cross-border transactions.
Pull Factor
Although Australia was regarded more as commodity based nation and less known in the field of
advanced technology and branding compared to the United States and Europe, the countrys
benefits lay in its investor friendly policies and world leading standard of living. Among all other
drivers, these were the major pull factors that attracted overseas Chinese investors. Among some
of the favourable Australian government policies, the qualities that stood out in the eyes of foreign
investors were the proactive immigration policy coupled with all the positive social factors and
admirable living conditions. Figure 6.2 shows the pictorial representation of Australian residential
property market model simulated based on the major push factors from offshore government
policies, major pull factors from Australian government policies and the resultant interactions of
Property, Space and Capital Market determinants:
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Figure 6.2: Australian Residential Property Market Model
Source: Author
The evaluation of current Australian residential property market performance is based upon both
foreign government policies and Australian government policies as depicted in Figure 6.2. Australian
residential property market performance would not have been as it is today if performance
evaluation was entirely based upon domestic conditions and drivers. It was undoubtedly the
existence of Government policies in areas such as foreign investment, immigration and social
security benefits that had provided the much needed foundation for a favourable investing
environment. As the world is becoming more transparent in the era of globalisation and advanced
information technologies, these favourable drivers were fast realised and grasped by global real
estate investors who then acted upon them with their active engagement in the cross border real
estate transactions in Australia. Chinese investors were case studied in this assessment from which
it was further revealed that the countrys one-child policy and going-out policy had pushed
China investors towards the pursuit of cross border real estate investments. Last but not least, the
global Deflector Effect further amplified the flow of Chinese investors money into Australian
6.3 Conclusion and Contribution to Body of Knowledge
World economies were subjected to one of the most severe impacts in history as a result of GFC
2008, both in terms of financial disasters and the change in economic structures of world nations.
243
World nations scrambled into Quantitative Easing measures (QE) subsequent to GFC 2008 giving rise
to widespread low interest rates regime, low returns on equity and bonds market, cheap and fluid
cross border money. Australia was not spared which saw the Reserve Bank of Australia reducing its
cash rate to the lowest recorded in Australian history at 2% in 2015. The underlying monetary
policies had significantly impacted the world real estate markets. In the Australia context, this thesis
contributes to the knowledge of Australian real estate markets emerging conditions by bringing into
perspective the latest trends and characteristics of world cross border real estate investment
subsequent to GFC 2008.
The findings from this research form an important insight into the new frontier of world cross
border real estate transactions in Australia. In view of the widespread of impacts foreign influences
had on the present housing market, the research outcomes of this study can result in changes in the
manner in which Australian residential property markets are valued and assessed. This study shed
light on the underlying characteristics of overseas investments and their unique diversification
strategies into Australian residential property markets.
Through merging both the new overseas investments patterns and the domestic conventional
determinants of Australian residential property markets, proper evaluation on the residential
property market is enabled. The conceptual framework and models developed from this research
serve to help enhance the academic theory and understanding of the Australian residential property
market, thus facilitating future research to enrich the body of knowledge in relation to foreign
investments in the Australia property market. Palin (2014) reported the emergence of global
property investors who looked beyond the traditional valuation methods, such as, the ratio of house
price to local income which were deemed obsolete. Empirical evidence was established in this thesis
that the assessment and valuation of the Australian residential property market had become
increasingly complex due to the uprising influences of various offshore variables. These factors must
not be overlooked and should be added to the traditional valuation method so as to enhance the
relevance of related research.
This research is the first to surface a tourism trend that had previously impacted the residential
property market in Europe and now in the Asia Pacific region. As Asia Pacific nations and their
citizens are getting more affluent and enjoying life styles previously deemed not possible, history
repeats itself that these affluent Asia Pacific citizens are now embracing the lifestyles previously
found exclusive in the rich western nations. One of these lifestyle trends is Residential Tourism. In
this study, although it was validated that the manner and characteristics of Residential Tourism had
remained mostly unchanged, it was now being repeated in the opposite side of the globe i.e. the
244
Asia Pacific region. Rich Asia Pacific investors are investing substantially into Australia residential
property market, as foreigners and tourists, due to the renowned favourable living conditions and
standards of education in Australia. Not only has this finding addressed one of the major market
concerns as to who these overseas investors were, it also provided a renewed platform on which to
base future valuation and research conduct.
The understanding of these drivers role play in offshore investment in Australian residential
properties is essential in drawing propositions that aim to benefit the Australian economy on a
macro perspective, and the Australian residential housing market on a micro perspective. This is
particularly important, if Australia intended to continue to enjoy the capital flow from foreign direct
investments into the country. Knowledge about residential property market dynamics needs to be
constantly improved and evolved in line with the emerging trend and amidst the increasingly
significant roles the overseas investors have in the structure of specific residential property markets
in major Australian cities. The findings of this study are set to provide empirical validations on
factors that are useful and relevant for decision making by both Australian policy makers and
industry players.
This thesis is the first to take the research cross-border in which interviews were conducted with
the high ranking real estate professionals in both Australia and China. Evidently the Chinese are one
of the most significant overseas investors in Australias residential property market. The research
approach had made a breakthrough in identifying the latest investment decision making processes
undertaken by both the Chinese HNWIs and the expanding Middle Class. Important insights on
major investment determinants such as Chinas 1 + 1 = 2 phenomenon, Chinas going-out policy
and Capital Deflator effect were uncovered. These findings established empirical validations on
offshore investments in the Australian residential property market and provided much in-depth
understanding of the matter to form the basis for effective decision making by policy makers and
the wider business communities in Australia. It is no doubt that a better understanding of the
relationship between the various economies and financial policies, both locally and abroad, and the
residential housing market will help to identify and address issues that were attributable as factors
giving rise to the overheating of the residential property market and at the same time, striving to
maintain a steady flow of foreign investment into the country. The expected benefits among which,
will include a basis for decision making and a platform for further research that could include, but
not limited to further segmentation studies of the residential property market.
245
6.4 Recommendations
6.4.1 The Brand Presence Most Liveable City
Empirical evidence revealed that traditional investment portfolios which comprised a mixture of
equity and bonds were either too volatile or provided too low a return. As a result, global real
estate markets had gained significant attention from the world investment community due to their
relatively stable risk profile and higher returns. Real estate had emerged as an investment option
among both the large institutions and the private investors seeking diversification and progressively,
it had become part of the asset class in the investment portfolio of world cross border investments.
In the midst of improved internationalisation and deregulation, Australias residential property

sector was identified as the major contender for global investors seeking improvement to their
investment portfolio due to its relatively stable economic and political condition. In this study, some
unique investing characteristics of global private investors in Australia were discovered. These global
private investors looked beyond the traditional purpose of portfolio diversification. Instead they
placed great emphasis on factors that were with emotional value attached such as clean air, nice
parks and environment security of Australia etc. They sought residential properties for leisure, for
their offspring and with the ultimate objective of attaining permanent residency. Australia had
emerged as an internationally relevant and a highly ranked investment destination in terms of socio-
economic stability and liveability. This research has aligned a strong Australian brand, akin to Apple
or Mercedes, with an investment premium investors have been prepared to pay. This mapped
closely to the emotional value attached to the environmental factors noted above. It is believed that
as long as Australia continues its favourable brand image internationally, foreign investors from all
over the world, not just China will continue to invest in Australian residential property.
Recommendation One:
This unique favourable characteristic of Australian residential property market is unprecedented and
rare. Australia should have every reason to celebrate this huge achievement and competitive
advantage that the country has over other countries in the world. If foreign investment is perceived
important for the Australian economy, efforts on improving various social infrastructures to sustain
Australias most liveable brand must be maintained.
Whilst global investors are excited as they find Australian residential property not only a viable
investment option but also a premium brand related to liveability, local Australians are fearful of
being priced out of their own housing market particularly in Sydney and Melbourne. The Australian
Government will have to address the fine line between attracting the much needed foreign capital
246
and the social wellbeing related to housing affordability for its citizens. If the government perceived
foreign investment as crucial to sustain the economy, the public must be made to understand that
Australia has increasingly become internationally relevant and its residential properties were
regarded more as a strong commodity type and not just mere shelters or homes. This proposition
requires a paradigm shift.
It is crucial that Australia start embarking on a mission to extend and improve its infrastructure of
roads and public transport with an objective to embrace its land resources into the equation.
Australia is a large country with a population of approximately 24 million, land is abundant and this
major resource, if explored systematically, could be the home for many Australians who were being
priced out due to housing affordability. Examples of successful affordable housing schemes are
plentiful in the world. Besides physical infrastructure and affordable housing, perhaps on a much
longer visionary scale, Australia should promote a knowledge based society with much realisation of
the role of advanced technologies as a long term plan. Many Americans are not subjected to housing
issue in the present time. They can live and work from a remote office in Seattle while meetings
are being conducted in Los Angeles; simply with the help of advanced technologies.
Chinas economic growth is slowing down as predicted by many economists. Concerns that of
Chinas economic growth slowdown will negatively impact Australian residential property market
are valid. In order to avoid the risk of a severe negative impact on the residential property market,
the current regulation that requires foreign owners to only sell to domestic buyers must remain and
be effectively and strictly enforced. Reference is made to the 1980s when the Japanese were
investing in Australias property market causing major concerns among the locals. Although the
Japanese had since exited from the market, Australia is again faced with another major upward
trend. The only difference this time round is that the major players are foreign investors from China.
It is believed that as long as Australia continues its favourable brand image internationally,
foreign investors from all over the world, not only China, will continue to invest in the Australian
6.4.2 Residential Tourism and Australian Tourism Industry
The tourism industry is a pillar of foreign income in Australia. Tourism Research Australia forecasted
the number of foreign tourists to increase by 5.9 % to 7.5 million in 2015, including a 15.5 percent
increment in the number of Chinese visitors (Freed, 2105). Spending from the domestic and
international tourism sectors was expected to reach AUD145.1 billion by 2024-25, up from
AUD107.8 billion in the 2014-15 financial year.
247
Residential Tourists uniquely carry both the characteristics of being tourists and migrants at the
same time and it is difficult to distinctly separate the discussion of one from the other. They have
been categorized into HNWIs and Middle Class respectively in this study. Note that both categories
live life here in similar a manner in that they spend money in Australia much like tourists do while
enjoying the most liveable aspects of life, yet the extensive duration they remain in Australia
resembles the migrants pattern. Above all, their visitation to Australia becomes repetitive as they
become owner occupier in the residential property they invested in. Contrary to the market fear
that these investors would make a ghost town out of the properties they purchased, these
Residential Tourists remain as owner occupier for a substantial period of time. Some eventually
become permanent residents in Australia. In simple terms, Australia has found itself acquiring long-
term customers through this Residential Tourism trend.
Recommendation Two:
In order to ensure the continuation of this steady flow of foreign income, Australias Government
needs to ensure the sustainability of various policies targeted at maintaining the quality of
healthcare, culture and environment, education and infrastructure as depicted by the Economist
(2015). Many of the Residential Tourists from Asia Pacific regard Australia as a western society and
hold high regard to western culture. This quality should be upheld and maintained at all costs as it is
this which has caught the eye of foreigners. It is recommended that some sort of induction program
be implemented to bring the new migrants into embracing the social element of being a true
Australian. The recent occurrences of a string of negative social incidents in Australia had
somehow discoloured the countrys image abroad. Australia should work to rectify the undesired
elements and restore its positive image of Australian-ness as a nation in order to stay relevant as a
desired destination, be it to live or to invest in.
In order to capture the data for this new trend of Residential Tourism in Australia, it is
recommended that two questionnaires be added into the existing Incoming Passenger Card and
enforced through the Department of Immigration and Border Protection Australia. Figure 6.3 shows
the existing Australian Incoming Passenger Card:
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Figure 6.3: Australian Existing Incoming Passenger Card
Source: Department of Immigration and Border Protection Australia
As per figure 6.3, the existing Incoming Passenger Card does not capture adequate information on
the proposed primary visitor accommodation during their stay in Australia and how often they have
visited Australia. It is recommended two minor additions in the Incoming Passenger Card to be
incorporated to assist in ABS data collection and segregating Residential Tourists with other form of
visitors. The proposed addition is tabulated below as an outline:
Proposed Question Proposed Answer

Where do you stay while in 1. Own accommodation
Australia? 2. Relative and Friends House
Address: 3. Hotel
4. other
Have you entered into Australia past 1. Yes
12 months for the same purpose? 2. No
Please indicate how many times 3. Number of Visits
have you entered into Australia past
12 months.
The first question of where do you stay while in Australia? will provide data on tourists who are
residing in their own accommodation, i.e. Residential Tourists. The second question of Have you
entered into Australia past 12 months for the same purpose? Please indicate how many times have
you entered into Australia past 12 months. will provide data on the frequency of Residential
Tourists revisiting Australia.
In the effort of incentivising more Residential Tourists to report voluntarily and thus create ease in
the process of Residential Tourist identification and data collection, it is proposed that a Residential
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Tourist identity card be issued to the Residential Tourists. This simplified identity card works
similarly to the frequent flyer program offered by Airlines, except that this identity card will have
an element of simplifying the immigration process when they arrive in Australia compared to normal
traveller. Simplified immigration process represents recognition of their status as a frequent visitor
to Australia and served well as an emotional gimmick that they are welcomed in Australia. Custom
and Border Patrol procedures should remain the same across all the visitors.
6.4.3 Education
Empirical studies have well addressed education was one of the major determinants for migration,
foreign income and real estate performance in Australia. Verbik and Lasanowski (2007) revealed the
increasing significance of Australian visa policies as an important in recruiting overseas skilled
migrants to Australia. They exerted that international student visas and graduate visa schemes had
become a central part of this recruitment effort. Hawthorne (2010) exemplified a transition termed
as two-step-migration that international students were allowed to remain in Australia after
completing an Australian degree and eventually applied for citizenship in Australia as skilled
migrants. The education system was revamped between 1996 and 2000 and the infamous transition
from academy to global business was recorded by (Marginson and Considine, 2000). As at June
2014, Australia was host to over 500,000 international students, with a significant proportion of
these students contemplating remaining in Australia at the conclusion of their studies. Students
were enrolled in programs ranging from a few weeks to several years had contributed to both
Australian short and longer term travel statistics. It is envisaged that this emerging trend will
develop into a vital element of Australias relationship with emerging countries within the Asia-
Pacific region and in particular with the populous nations of China and India (Dwyer, 2010), in the
context of both education and tourism.
Education was validated repeatedly as a major component of Australias service industry, having
overtaken iron ore as one of the Australia largest foreign exchange income sources. Its role in the
current Australian economy environment has become even more important in the midst of
Government efforts moving away from relying heavily on resources development. Pascoe (2015)
reported that the rise in foreign students will give rise to demand in residential property in Australia
especially in the Education hotspots like Sydney and Melbourne. Recently the changes in
Government regulations on migration policies had made it easier for students to remain in Australia
after graduating and eventually becoming permanent residents. Garnaut (2015) from The Age
reported that Australia is set to issue more than five million visas in year 2015, something not seen
since World War II. He attributed the significant jump in the visas issuance to surging numbers of
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international students, tourist and workers on short-term visas. According to Michael Pezzullo,
Secretary of the Department of Immigration, as many as 1.9 million foreigners are likely to be in the
country at any one time in 2015. By September 2015, there were 585,846 enrolments by full-fee
paying international students in Australia on a student visa. This represents a 10.2% increase on YTD
September 2014 and compares with the average YTD September growth rate for enrolments of
5.7% per year over the preceding ten years (AEI, 2015).
Recommendation Three:
Exploration in this study revealed an emerging trend of international students enrolling in Australias
education institutions in their earlier years of study - in primary and secondary school. Instead of
the general perceptions that international students were mostly confined to tertiary degree courses,
they had been residing in Australia for a much longer period of time. This emerging trend had
further incentivised overseas parents investing in residential property market in Australia for their
childrens accommodation purposes.
Whilst this study revealed that international students had begun their education in Australia in their
earlier years, assessments and decision makings by these international students had been centred at
the reputation of Australian tertiary institutions especially in the context of choices among other
universities in United States and United Kingdom. Primary and secondary educations were regarded
as pathways for these international students to be eventually landed in a reputable university as
the final goal.
According to the Times Higher Education, Australian universities were ranked below universities in
United States, United Kingdom, Europe and Singapore (Williams, 2015). Times Higher Education
assessed the world universities performance based on 13 major criteria including teaching,
international outlook, research, citation and industry income. Australian universities rankings were
weak in the area of teaching and research, for example, being ranked 33rd in the world. University of
Melbourne scored 62 in teaching and 75.5 in research and its closest competitor National University
of Singapore was ranked 26th and scored 71.7 in teaching and 84.5 in research.
It is recommended that if Australian universities intend to compete in the international arena for
student enrolments, more energy and resources needed to be channelled into the these two
aspects, namely teaching and research. Singapore and China are investing very heavily in universities
and their public spending on research is growing while Australia seems to be heading in the wrong
direction with its dwindling funding for universities research. However, currently there seems to be
an over emphasis on research outcomes rather than teaching outcomes in universities. It is common
251
knowledge that in the higher education landscape that students are the heart. However, in many
universities teaching is regarded as a poor cousin to academic research. The institutional funding
and prestige to be gained from a successful performance resulted in many academics feeling under
great pressure to turn out grant applications and narrowly focused journal articles than to talk to
students (Williams, 2015).
6.5 Areas of Further Research
This study noted a number of issues arising from the relationship between the residential property
market and the inflow of foreign investments which warrant further investigation. Below are the
recommended areas for further research:
i. Private Wealth, Expanding Middle Class and their impacts on world cross border real
estate markets; using an Australian city as a test case.
An emerging trend was discovered in the world cross border real estate transactions subsequent to
GFC 2008 (see Chapter 1). The corporate and institutional ownership which dominated the real
estate market globally suffered setbacks in GFC 2008. Empirical evidence revealed that the
diminishing institutional cross border investments were caused mainly by a world market credit
crunch and the decrease in debt funding. Corporate investments in global real estate in year 2012
stood at approximately USD600 billion, far below the pre GFC 2008 level which was more than
USD900 billion. In contrast, private wealth investment in global real estate had surpassed the
highest level in 2007 with approximately USD300 billion global real estate changing ownership in the
hands of wealthy private funds. This relatively new trend emerged only soon after GFC 2008 and the
impact of this new development is set to revolutionise the global real estate markets. In the midst of
the globalisation era, this new development of global cross border real estate private investment is
increasingly relevant in Australia as Australian cities are becoming more internationally relevant and
well known. Future studies on Australian gateway cities and residential property markets at the
backdrop of global private wealth will shed crucial and meaningful insights on Australian real estate
market performance, as part of important components of the Australian economy.
ii. Asia Pacific World High Net Worth Individuals, Expanding Middle Class and the Apartment
Market in Australian major cities
The residential property market was identified in Chapter 1 Introduction as the largest asset class
invested in by High Net Worth Individuals (HNWIs) and Expanding Middle Class compared to cross
border commercial property investments worldwide. Overtaking the rest of the world, Asia Pacific
investment funds emerged as the largest cross border real estate investors, surpassing what had
252
been dominated by the Western advanced countries subsequent to GFC 2008. Chapter 2 literature
reviews noted the discovery that among all the cross border transactions, private capital from the
Asia Pacific played a major role and this capital seemed to be taking higher risks compared to
institutional investors including with debt financing. Private capital adopted a different investment
behaviour favouring residential properties due to reasons beyond normal investment theory. While
the assessment on returns and diversification were still the guiding pillars in their decision making
process; they imputed elements of emotional values into their acquisition strategy citing the
presence of other considerations such as wealth preservation, attaining permanent residency and
securing good living conditions for their children. Much of the private capital from Asia Pacific was
found invested in apartment markets of the world major gateway cities such as London, New York,
Paris, Sydney and Melbourne. At the same time, there had been numerous market commentaries on
the oversupply of apartments in Sydney and Melbourne. With the captivating new investment
trends emerging subsequent to GFC 2008 and the current lack of studies conducted on apartment
demands in Australian major gateway cities, this oversupply scenario warrants further study before
appropriate actions can be taken to effectively address the situation. The emergence of new
wealthy investors from Asia Pacific who had their focus on residential property markets with a set of
investment behaviours differs from the conventional practice had taken the Australian real estate
market into a new territory and the need to further research has since intensified.
iii. Australian most liveable cities, branding and the residential property market
Quantitative analysis in this study had created an investment model which revealed RT as a new
investment component in Australian residential property markets (see Chapters four and five). The
unique investment characteristics of RT who had their priorities set to include intangible values such
as social security and living conditions had added complexity in the property market modelling and
valuation exercise. Participants from interviews conducted both onshore and offshore had in
numerous occasions stressed that the Australian cities carry brand presence in their image in terms
of their liveability and education standards. Due to the brand images of Australia imprinted in the
eyes of the world investment communities, overseas private investors seem undeterred by the high
price points of residential properties in Australia. Demand continues to pour in from overseas
investors despite the escalating prices. The extent to which this brand presence of Australias
liveability influences investors decision in paying premium prices for its residential properties
should be further investigated.
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iv. The New source of Foreign Money in Australia Real Estate Markets
Australia was perceived as a commodity based nation in terms of its exports and source of foreign
income during and after GFC 2008, riding on the significant economic growth in Asia Pacific
countries, particularly China. Australias persistent trade deficits were mainly attributable to the
slowdown in Chinas economic growth and reduction in China domestic construction activities. This
setback had raised concern among economists asserting that Australia does not measure up to its
place as an advanced country due to its lacking in export diversification and too heavy a reliance on
commodities as a single source of exports. The deteriorating economic conditions in Australia
especially in its unhealthy balance of payments had given rise to many projecting the need for
Australia to rely on its real estate industry to cushion the negative impacts. In Chapter 5 Qualitative
Analysis, the concern regarding Australias macro-economic conditions was raised and the possibility
of real estate markets contribution to the potential recovery of the Australian economy was
explored. Alongside this new development, there were concerns among the Australian locals that
they were gradually being priced out due to foreign investments in the Australian residential
property market and this sentiment had been whirling in the local media. What paradigm shift is
needed to realign the economic measures acutely needed in Australia to address both the countrys
economic needs and meeting the peoples expectations? Reference is made to the hugely successful
public housing scheme in the United States that allows private sectors to fill the gap of providing
affordable housing in the form of Multi-family properties. Can Australia evolve itself to
accommodate the global changes as residential properties emerge as an important investment
portfolio for the world investment communities due to diminishing returns from traditional equity
and bonds markets?
This thesis revealed the latest characteristics of world cross border real estate investment
subsequent to the GFC 2008. The findings of this research discovered imminent trends and profound
changes in the world investment patterns and determinants as a result of GFC 2008. Led by the
United States, countries all over the world are adopting Quantitative Easing (QE) economic
measures, although each with different magnitudes. Among others, these series of actions had given
rise to a widespread low interest rate regime, low returns on equities and bonds, cheap and fluid
cross border money. Monetary policies outpaced the traditional fiscal policies and the world real
estate transactions amidst this development have since evolved too. In conclusion, the new findings
that this research surfaced could form an initial insight into the new frontier of foreign investments
in world cross border real estate transactions. They can potentially alter the framework in which the
Australian residential property market is assessed, drawing from the validated results of widespread
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foreign influences in the Australian residential property market. This study uncovered the imminent
overseas investments significance and their unique asset allocation strategies into Australian
residential property market. The associated impacts on the housing mortgage market of AUD1.4
trillion in 2015 and the issuance of RMBS equivalent to that of AUD32 billion (highest level since GFC
2008) are equally relevant. By merging both the overseas new investments patterns and the major
determinants in Australian residential property market, the looming market trends are unveiled. The
conceptual framework and models developed from this research will help enhance academic theory
and understanding of the behaviour of the Australian residential property market, further
facilitating future research to enrich the body of knowledge in relation to foreign investments in
Australias property market.
End.
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Appendices
Appendix I: Non-traditional Determinants and the Expected Correlations Outcome
Non-traditional Data Rationales Correlations Analysis

Determinants Approaches
Long-term visitor ABS3401 Overseas Arrivals and This non-traditional factor is
arrivals (LTVA) Departures data provides expected to provide positive
information and analysis of short- (+) correlation with the
term visitor arrivals (STVA) and house prices in the study.
Long-term visitor arrivals (LTAV).
LTVA denotes overseas visitors
who state that they intend to stay
in Australia for 12 months or more
(but not permanently).
Short-term Overseas visitors who intend to
visitor arrivals stay in Australia for less than 12
(STVA) months.
Short-term Overseas visitors who intend to
visitor arrivals stay in Australia for less than 12
Victoria(STVAV) months in Victoria State.
Education Australian Education International This non-traditional factor is

(AEI) records Enrolment data from expected to provide positive
the Commonwealth Provider (+) correlation with house
Registration and International prices in the study.
Student Management System
(PRISMS) database. PRISMS
includes:
enrolment data for all sectors
(schools, Vocational Education,
Higher Education and ELICOS)
enrolments by students on a
student visa
data based on electronic
confirmation of enrolments
(eCoE), and
country of origin based on
citizenship rather than permanent
home residence.
Space Market Key Data Rationales Correlations Analysis

Economic Indicators Approach
GDP Per Capita (GDP) ABS5206 defines GDP as the total This traditional economic
market value of goods and factor is expected to
services produced in Australia provide positive (+)
within a given period after correlation with Melbourne
deducting the cost of goods and house prices. However, this
services used up in the process of study does not rule out the
256
production but before deducting possibilities of negative (-)

allowances for the consumption correlation due to
of fixed capital. GDP per capita is Australian GDP per Capita
the ratio of the chain volume growth lagging behind all
estimate of GDP to an estimate of OECD countries (Wilkie,
the resident Australian 2008) and diverged from
population. the actual improving house
prices in Australia since GFC
2008.
Total Employed ABS6202 defines Total Employed This traditional economic

Labour Force (EMPL) Labour Force as the civilian factor is expected to
population aged 15 years and provide positive (+)
over engaged in employment. The correlation with house
definitions conform closely to the prices.
international standard definitions
adopted by the International
Conferences of Labour
Statisticians.
Population Growth ABS3101 defines Population This traditional economic

(Pop) Growth as the sum of natural factor is expected to
increase and net overseas provide positive (+)
migration. For states and correlation with house
territories, population growth also prices.
includes net interstate migration.
After the Census, intercensal
population growth also includes
an allowance for intercensal
difference.
Net Saving Current ABS5232 defines Net Saving as the This traditional economic
Prices (Save) balancing item of the income factor is expected to
account, equal to total income provide positive (+)
receivable less total income correlation with house
payable, final consumption prices.
expenditure and consumption of
fixed capital. Represents the
excess of income over
consumption. Current prices
relates to savings valued at the
prices of the period to which the
observation relates.
Net Overseas ABS3101 defines Net Overseas This traditional economic

Migration-NOM Migration as the net gain or loss factor is expected to
of population through provide positive (+)
immigration to Australia and correlation with house
emigration from Australia. prices.
257
Capital Market Data Rationales Correlations Analysis

Key Economic Indicator Approach
10-year Government RBA defines Government Bond Traditionally this economic
Bond Yield -10Bond Yield as the midpoint of factor is expected to provide
predominant bid and offer negative (-) correlation with
quotations in each market. Yields the house prices, signifying the
for the Australian Government historical reverse relationship
Indexed Bond prior to 18 between real estate market
September 2013 are sourced and bond market
from a survey of dealers by the performance. However, this
RBA. All other yields are sourced relationship is applicable only
from Yieldbroker Pty Limited. on a traditional asset
Figures are the average of daily allocation strategy with less
end-of-day yields for that month. emphasis on foreign
Indexed' bond yields are those on investments strategy. As at
bonds with the longest time to June 2015, Australian Office of
maturity. Financial Management
(AOFM, 2015) reported that
approximately 65.2% of the
Australian Government
Securities (Treasury Bonds,
Treasury Indexed Bonds, and
Treasury Notes) were in the
hands of foreign investors. As
foreign investors keenly
pursue alternative asset
classes as part of their
diversified portfolio, real
estate had emerged as a
crucial asset class alongside
with ACGBs with a similar
investment trend observed. As
such, this economic factor is
expected to provide positive
(+) correlation with house
prices.
ASX 200 Index - ASX The S&P/ASX 200 index is a This traditional economic
market-capitalization weighted factor is expected to provide
and float-adjusted stock market negative (-) correlation with
index of Australian stocks listed house prices.
on the Australian Securities
Exchange from Standard &
Poor's.
Exchange Rate - Forex RBA bulletin defines Exchange This traditional economic
Rate as the rate shown for the factor is expected to provide
USD is the WM/Reuters negative (-) correlation with
Australian Dollar Fix at 4.00 pm house prices.
(Sydney) on the day concerned.
258
Mortgage Rate - MRate RBA bulletin defines Mortgage This traditional economic
Rate as Housing loan rates - factor is expected to provide
those quoted for loans to owner- negative (-) correlation with
occupiers; in most cases, the house prices.
same rates also apply to
investment housing.
90-day Bank Bills Yield RBA defines AFMAs 90 day bank This traditional economic
90Bill bill futures and options product is factor is expected to provide
Australias benchmark indicator negative (-) correlation with
for short term interest rates. house prices.
Property Market Data Rationales Correlations Analysis

Key Economic Indicator Approach
New Housing Supply ABS 8752 defines that a This traditional economic
residential building job may result factor is expected to provide
in the creation of one or more negative (-) correlation with
dwellings. Multiple dwelling unit house prices.
jobs can be buildings (such as
apartment blocks) which contain
several dwelling units, or a group
of single dwellings (such as a
project to build multiple houses
to a subdivision). All dwelling
units created by a job are
considered to have completed
when the job is completed.
Progress on individual dwelling
units is not tracked.
Building Planning ABS 8731 defines Building This traditional economic

Approvals Approvals as building work factor is expected to provide
approved for dwellings as total positive (+) correlation with
number. The data series is the the house prices. Building
approvals for Victoria state on all application increases as the
types of dwelling building in all housing market performance
sectors. improves and the cycle then
flows to prices being
negatively affected if over
building occurs.
Rent Growth ABS 6401 captures the Consumer This traditional economic
Price Index (CPI) which measures factor is expected to provide
quarterly changes in the price of positive (+) correlation with
a 'basket' of goods and services the house prices.
which account for a high
proportion of expenditure by the
CPI population group (i.e.
metropolitan households). Series
A2331841F captures Rent Growth
259
in Melbourne.
House Price Index ABS 6401 defines Residential This traditional economic
Property Price Indexes for eight factor is expected to provide
capital cities in Australia. positive (+) correlation with
the house prices data
collected from REIV database.
This indicator and its trend
analysis shall provide the
embedded validation of the
accuracy of data collected
from REIV as the first
statistical testing of data
collection exercise.
Building Activity Value ABS 8752 captures the statistics This traditional economic
of Building Work Done of building approval details and factor is expected to provide
(Residential Victoria returns collected from builders negative (-) correlation with
State) and other individuals and house prices.
organisations engaged in building
activity. Since the September
quarter of 1990, the quarterly
estimates have represented all
approved public and private
sector owned for residential
building jobs valued at
AUD10,000 or more and non-
residential building jobs valued at
AUD50,000 or more. This series
captures data for residential
buildings in Victoria State.
China Data Rationales Correlations Analysis

Space Market Key Approach
Economic Indicators
Per Capita Disposable The total actual income of the This economic factor is
Income (CIncome) sample urban households, expected to provide positive
including regular or fixed (+) correlation with house
income and occasional income . prices.
China Real GDP Gross Domestic Product (GDP) This economic factor is
Growth(CGDP) refers to the final products of expected to provide positive
all resident units in the country. (+) correlation with house
Gross domestic product is prices.
expressed in three different
forms, i.e. value, income, and
products respectively. The form
of products refers to the value
of all final goods and services
260
for final use by all resident units

plus the value of net exports of
goods and services during a
given period of time. GDP
growth rate compares GDP of
two fiscal periods.
China CPI Inflation The trend and degree of This economic factor is
(CCPI) changes in prices of consumer expected to provide positive
goods and services purchased (+) correlation with house
by urban and rural residents, prices in Australia. As CPI
and is a composite index increases in China, overseas
derived from the urban real estate investment will
consumer price index and the become increasingly
rural consumer price index. affordable.
China Outflow of FDI Outward investment for This economic factor is

(CFDI) reporting country refers to a expected to provide positive
foreign direct investor is an (+) correlation with house
individual, an incorporated or prices.
unincorporated public or
private enterprise, a
government, a group of related
individuals, or a group of
related incorporated and/or
unincorporated enterprises
which has a direct investment
enterprise - that is, a subsidiary,
associate or branch - operating
in a country other than the
country or countries of
residence of the foreign direct
investor or investors.
Price Index for Reflects the trend and degree This economic factor is
Investment in Fixed of changes in prices of expected to provide negative
Assets (FA) investment in fixed assets. The (-) correlation with house
investment in fixed assets prices.
consists of three components,
namely the investment in
construction and installation,
the investment in purchases of
equipment and instrument, and
the investment in other items.

Capital Market Key Approach
Economic Indicators
Shanghai Stock Stock market index of all stocks This economic factor is
261
Market Indies (SSE) (A shares and B shares) that are expected to provide negative
traded at the Shanghai Stock (-) correlation with the house
Exchange. prices.
China Exchange OECD defines Exchange Rate as This economic factor is

Rate (CForex) the price of one currency over expected to provide positive
the United States Dollar. (+) correlation with the house
prices. A stronger Yuan makes
overseas investment more
affordable. However, recent
developments had shown
otherwise. As Yuan
depreciated in value,
investors from China seem to
prefer overseas currency as
part of the wealth
diversification strategy.
China Short Term OECD defines Short-term This economic factor is

Interest Rate interest rates as rates at which expected to provide negative
(CIRate) short-term borrowings are (-) correlation with house
effected between financial prices.
institutions or the rate at which
short-term government paper is
issued or traded in the market.
China Balance Of OECD defines Balance of This economic factor is

Payment (CBOP) Payments as investment expected to provide positive
incomes covers income derived (+) correlation with house
from a resident entitys prices.
ownership of foreign assets.

Property Market Key Approach
Economic Indicators
Price Indices of Refers to the trend and degree of This economic factor is
Construction and changes in prices of the expected to provide positive
Installation construction of buildings and (+) correlation with the house
(CBuiltInx) structures and the installation of prices in the Melbourne.
equipment.
China Residential The floor space of the residential This economic factor is
Buildings Floor Space buildings completed among the expected to provide negative
Completed (CFlr) total space of buildings under (-) correlation with house
construction. prices.
Floor Space Newly The total floor space for newly This economic factor is
Started (CNewFlr) started construction for all expected to provide negative
buildings and refers to projects (-) correlation with house
262
having construction and prices.

installation activities started in the
reference period.
China Construction Total of construction products, This economic factor is

Output Value expressed in money terms, expected to provide negative
(CCValue) completed by construction and (-) correlation with house
installation enterprises during a prices.
given period of time.
263
Appendix II: Proposed Semi-Structured Interview Questions
(In Australia)
Information on your Organisation
1. What property markets does your organisation operate within (both geographically and scale)?
2. How does your organization service foreign investors, specifically foreign investors from China, in
the Australian residential property market?
Information on Overseas Investors
1. What are the types and characteristics of these overseas investors in Melbourne residential
property market?
2. How have these offshore investments impacted on the residential property market in Australia?
3. Why do they invest in Melbourne? Specifically refer area listed below:
- Melbourne Metropolitan, Doncaster, Balwyn and Box Hill
Property Market Conditions
1. Has property market characteristics significantly changed in Melbourne (or Doncaster, Balwyn
and Box Hill), if so why?
2. Assessing past and present, who are buying residential properties in Melbourne (or Doncaster,
Balwyn and Box Hill)? What is your perception on the composition of transactions derived
separately from local, migrants and overseas investors?
3. Has the Melbourne property market conditions been affected by these offshore investment?
- Sales : Competition, features, types of purchases
- Leasing : Competition, features, types of tenants
Information on Education and Tourism
1. What is the significance of the Australian education system in overseas investors decision?
Specifically refers to the Secondary Schools and Tertiary Education in Melbourne.
2. Is there any relationship between Melbourne as a world tourist destination and the investors
decision to purchase residential properties? If yes, why?
3. As part of the decision making process, do China investors frequently visit to the locations of
interest before they purchase the residential properties?
4. What is the role of the living standard and conditions in Melbourne, specifically refer to
Doncaster, Balwyn and Box Hill on overseas investors choice and decision making when it
comes to buying residential properties?
264
Appendix III: Proposed Semi-Structured Interview Questions
(In China)
Information on your Organisation
1. Which overseas property markets does your organisation operate within (both geographically and
scale)?
2. How does your organization service Chinese investors who wish to invest in overseas property
market?
Information on China Investor Overseas Investments
1. What are the different characteristics and types of Chinese investors who invested in overseas
residential property market?
2. Focusing on private investors from China, what do you perceive are the main drivers for their
investment in overseas residential property markets?
- Are these drivers mainly specific factors or are they economic and social factors that encouraged
overseas investments?
- What are any other considerations, for example capital preservation, taxation? Please explain.
Property Market Conditions
1. Assessing past and present, which type of properties do China private investors prefer and why?
2. Compared to other overseas investment destinations, how has Australia performed in:
- Sales : Competition, features, types of purchases?
3. What are the major local factors in Australia (Melbourne) that attract Chinese property investors
to buy residential properties?
Information on Education and Tourism
1. Will the investors regularly visit locations interested prior to residential property purchase? If yes,
why and with who?
2. Do you perceive the education system play a role in these investors decision making? How
significant is Australian education system influences these overseas investors decision on
residential property market?
3. What is the role of the living standards and conditions (tourism) of Australia on Chinese investors
choice and decision makings when it comes down to buying overseas residential properties?
265
Appendix IV: Interviewed Property Professionals
Role in Type of Organisation Location/Coverage Code to be used for

Organization analysis
Director Retail Real estate consultant - Global Melbourne, Australia-Global-Real-
Investment multi-disciplinary property Victoria Estate-Agent
organisation, property agent
serving all types of property
markets
Owner Local Residential Property Melbourne, Australia-Real-Estate-
Agent Victoria Agent
Associate Real estate consultant Shanghai, China China-Global-Real-
Director Global multi-disciplinary Estate-Agent
property organization,
property agent serving all
types of property markets
Owner China Property Agent serving Shanghai, China China-Real-Estate-
overseas property Agent
investments and international
property conference organiser
National Head Real estate researcher Melbourne, Australia-Global-
of Research Global multi-disciplinary Victoria, Australia Researcher
property organisation serving
all types of property markets
President Residential real estate Melbourne, Australia-Local-
professional association Victoria, Australia Property-Researcher
Director, Head Real estate researcher Shanghai, China China-Global-
of China Global multi-disciplinary Property-
Strategy property organisation serving Researcher1
Research all types of property markets
Head of Real estate researcher Shanghai, China China-Global-
Research Global muti-disciplinary Property-
property organization serving Researcher2
all types of property markets
President Shanghai local property Shanghai, China China-Local-Property-
surveyor and agent Researcher
Director, Real Real estate consultant Melbourne, Australia-Global-
Estate Services Global organisation providing Victoria Australia Property-Consultant
Advisory financial advisory services
Development Real estate consultant Melbourne Australia-Local-
Manager providing advisory services to Australia Property-Consultant
overseas investors on
mortgages and education
General International Merchant Shanghai, Beijing China-Global-
Manager Banker providing cross China Investment-
border financing and Consultant
transactional services
Vice President Fund Manager and Consultant Shanghai, Beijing China-Local-Property-
providing advisory services China Consultant
to companies and clients on
investment
Director - Property Developer International, Global-Property-
Development Australia Developer
Owner Property Developer Australia Local-Property-
Developer
266
Appendix IV: Publications in Online News Portals
Citations for the online news portal include (extracted from News RMIT):
Wealthy Indians poised to buy up trophy homes

Sunday Age, 13 Mar 2016
Peng Wong
+ 1 website
China travel the way to Australia to buy a house off to the main Mexican housing market Daikin
"The Australian Times," O Odd News, 06 Mar 2016
Peng Wong, RMIT Research
http://www.myactimes.com/actimes/plus/view.php?aid=1043469
China "property tourists" into the Melbourne property market force: Self emphasis on investment
Property Network, 08 Mar 2016
http://jn.loupan.com/html/news/201603/2206301.html
Also:
http://www.dian-ai.com/news-view-id-537290.html
http://edu.sina.com.cn/a/2016-03-08/doc-ifxqafha0475948.shtml
http://hk.crntt.com/crn-
webapp/doc/docDetailCreate.jsp?coluid=49&kindid=975&docid=104150642&mdate=0308103427
http://lianyungang.house.qq.com/a/20160308/026352.htm
http://news.focus.cn/aomen/2016-03-08/10739589.html
http://huaren.haiwainet.cn/n/2016/0308/c232657-29710835.html
http://dl.house.sina.com.cn/news/2016-03-08/07546112757041535966012.shtml
+ 6 websites
China travel to Australia to buy a house way off into the Melbourne housing market Daikin master
Overseas property outside the home network, 07 Mar 2016
http://www.juwai.com/news/167159.htm
Also:
http://www.huaxunnsw.com/house/dichan/14573463856334.html
http://www.erhainews.com/n1289552.html
http://commerce.dbw.cn/system/2016/03/07/001071157.shtml
267
http://gz.workercn.cn/23302/201603/07/160307165139953.shtml
http://www.wtoutiao.com/p/1a4vTfC.html
http://news.cnyes.com/Content/20160307/20160307142011548587210.shtml
http://www.hkcd.com/content/2016-03/07/content_989153.html
http://www.hb.chinanews.com/news/2016/0307/241635.html
http://toutiao.com/i6259139437838483969/
http://big5.china.com.cn/gate/big5/news.china.com.cn/live/2016-03/07/content_35455166.htm
http://sina.com.hk/news/article/20160307/1/11/2/%E4%B8%AD%E5%9C%8B%E6%88%BF%E7%94
%A2%E9%81%8A%E5%AE%A2%E6%88%90%E5%A2%A8%E7%88%BE%E6%9C%AC%E6%A8%93%E5
%B8%82%E7%94%9F%E5%8A%9B%E8%BB%8D-
%E8%87%AA%E4%BD%8F%E9%87%8D%E6%96%BC%E6%8A%95%E8%B3%87-5507626.html
http://www.dianxinnews.com/world/2016/03/07/515678019.html?comment=1
http://dailynews.sina.com/gb/news/usa/uslocal/chinanews/20160306/18297215625.html
http://www.huaglad.com/aunews/20160307/239683.html
http://www.huaglad.com/auhouse/invest/20160307/239656.html
+ 20 other websites
China travel the way to Australia to buy a house off to the main Mexican housing market Daikin
"The Australian Times," O Odd News, 06 Mar 2016
From China, with love: the residential tourists falling for Melbourne property
Domain, 06 Mar 2016
http://www.domain.com.au/news/from-china-with-love-the-residential-tourists-falling-for-
melbourne-property-20160305-gnbe0t/
China "property tourists" and coke Melbourne

Saia Mall, 09 Mar 2016
http://www.spyb.cn/jiaju/fangchan/201603/s973728.html
Also:
268
http://km.house.qq.com/a/20160309/017770.htm
http://culture.dwnews.com/news/2016-03-08/59723663.html (08 Mar)
While tourism side to Australia to buy a house? The rise in new wave of Chinese
Micro headlines, 15 Mar 2016
http://wtt.wzaobao.com/p/102y715.html
269
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The Drivers of Overseas Investments in the

Australian Residential Property Market

A thesis submitted in fulfilment of the requirements for the degree of

Ph.D. (Built Environment)

Peng Yew Wong

Bachelor of Economics (Accounting) Monash University

School of Property Construction and Project Management

College of Design and Social Context

Peng Yew Wong

16th September 2016

Peng Yew Wong

LIST OF TABLES ....................................................................................................... vi

ABBREVIATIONS AND ACRONYMS ........................................................................ vii

CHAPTER ONE: INTRODUCTION

CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction .36

CHAPTER THREE: RESEARCH DESIGN

3.4 Data Collection Strategy86

CHAPTER 4: STAGE 1 QUANTITATIVE ANALYSIS

CHAPTER 5: STAGE 2 QUALITATIVE RESEARCH

CHAPTER 6: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

Chapter 2: Literature Review

Chapter 3: Research Design and Methodology

Chapter 4: Quantitative Analysis

Chapter 5: Qualitative Research

Figure 5.2 Education Nvivo Coverage Analysis 186

Chapter 6: Summary, Conclusions and Recommendations

Chapter 2: Literature Review

Chapter 3: Research Design and Methodology

Chapter 4: Quantitative Analysis

ABBREVIATIONS AND ACRONYMS

ACGBs Australian Commonwealth Government Bonds

AUD Australian Dollar

BOP Balance of Payment

EMEA Europe Middle East Africa

ERP Estimated Resident Population

FDI Foreign Direct Investment

FIRB Foreign Investment Review Board

FREI Foreign Real Estate Investment

FPI Foreign Portfolio Investment

GFC 2008 Global Financial Crisis 2008

HNWI High Net Worth Individual

IMF International Monetary Fund

LTVA Long Term Visitor Arrival

PPP Purchasing Power Parity

RMBS Residential Mortgage Backed Securities

RTs Residential Tourists

STVA Short Term Visitor Arrival

STVAV Short Term Visitor Arrival Victoria State

SWF Sovereign Wealth Fund

VFR Visiting Friends and Relatives

USA United States of America

USD United States Dollar

1.1.1 Global Wealth and Foreign Direct Investment (FDI)

Source: UNCTAD 2013

1 United States (1) 187

Source: UNCTAD 2014

Figure 1.3: World Real Estate Value

Directly owned by UHNWIs