The Australian real estate market has always attracted foreign real estate investments, particularly from China. However, recent slowdowns to China’s growth has caused the Chinese government to limit the outflow of money from the country. Government regulations within China have been placed restrictions on domestic citizens sending money overseas.

This means that it’s become harder for Chinese investors to invest in the Australian real estate market. But, while this might mean a slowdown for the market, experts believe that the overall impact will be small.

Basis Point managing director CT Johnson says that, “What I expect is that it will drag down the rate of increase in housing prices in Australia. I believe that there will be more pressure on high density, off-the-plan buildings. I expect to see zero impact on the other end of the scale - land and house type developments."

China’s Economic Slowdown

The Chinese government is trying to curb Chinese investments in Australian real estate with tighter controls on global money transfers and more stringent investigation into potentially bad deals.

This tightening of capital controls works to restrict money transfers out of China, making it difficult for domestic investors to transfer funds to Australia.

These new policies come on the heel of China’s slowdown in GDP growth. This slowdown has caused the country’s currency to depreciate against the Australian dollar. The Chinese economy grew at its slowest rate in 2015, which has raised red flags regarding slower demand for Australian property.

The Royal Bank of Australia released a statement saying, "In the extreme, Chinese investors may need to sell some of their existing holdings of Australian property to cover a deteriorating financial position at home.”

Experts believe that the new regulations in China will cause more of a price correction than anything else for the Australian real estate market.

The Impact on the Australian Real Estate Market

However, while China is trying to curb its foreign investments, It doesn’t look like Chinese dollars are going to stop flowing into Australia.

The Foreign Investment Review Board (FIRB) has shown that the amount of approved Chinese investments in both residential and commercial property is currently on an upward trend. The number of investments approved in 2015 was $24.3, up from $12.4 billion in 2014.

Further, the FIRB released an annual report that showed spending on Australian residential and commercial real estate nearly doubled in the 12-months ending June of last year. This means that spending on domestic real estate has increased from $12.4 billion to $24.2 billion over the past 12 months. These numbers are also up from the $5.9 billion in 2013.

This shows that foreign investment - specifically from China - remains strong in Australia, even with the implementation of stricter policies from within China’s borders.

"Overall we’re seeing strong Chinese investments into Australia's broader economy, which is in line with premium products, services and lifestyle-oriented themes," said Doug Ferguson, KPMG head of Asia and international markets.

This is in line with reports that show total foreign investment rising by 17 percent in 2015. So, even though China may be trying to restrict the flow of cash abroad, Australia still seems to be a strong real estate market.

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