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Rise of the Chinese buyer means Australia will need new tactics

The rise of Asian investors in China will necessitate changes to regulations, but not interest rates.
Raising the rate of interest in Australia will not be an effective way to mitigate against the risk of a property bubble in the future, it has been warned.

Traditionally, the Reserve Bank of Australia would raise the base interest level as a way to drive down price increases if property valuations were becoming too high to be sustainable, but UBS' regional chief investment officer Asia Pacific Kelvin Tay told a luncheon crowd in Sydney on Wednesday that it won't work this time around.

He said that Chinese buyers with a lot of money and a strong appetite to invest are unlikely to be turned away by a slight hike in interest rates.

Instead, UBS wants to see the Australian government introduce ideas seen in the likes of Hong Kong, where tax reforms have helped to curb spending in one of the world's hottest markets.

Similar changes came into effect in Dubai last year, where officials doubled transaction fees in a bid to attract a higher proportion of real investors. 

"Australia should follow the lead of jurisdictions like Hong Kong that have successfully introduced tax reforms that target people who buy and sell investment properties," said Mr Tay.

Posted by Craig Francis

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