Cash to Australian Property Real-Estate by Chinese means interest rate not so effective

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The continuing injection of cash into the Australian Property Real-Estate market by Chinese investors looks to be resulting in the Reserve Bank of Australia (RBA) loosing the ability to use the official interest rate to protect Australian investors against the risk of a housing bubble.

Recently the regional chief investment officer of the Union Bank of Switzerland (USB) Asia Pacific Kelvin Tay said; "Chinese buyers won't be deterred by marginally higher interest rates because they are buying properties with mostly cash.

"Australia has had a spate of robust capital city housing data in recent months, but Chinese buyers have been pushing prices up.

"Rate hikes will now be an ineffective tool to push down property prices and that is why UBS does not think the RBA should do it."

Instead, Australia should consider introducing other regulatory reforms designed to mitigate the risk of a housing bubble, he said.

"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," Mr Tay said.

Mr Tay was speaking at a luncheon for the UBS Wealth Forum when he outlined the investment bank's current asset class allocation strategy.

He said UBS is tipping global growth this year to hit 3.4% as synchronised growth in big markets is underpinned by rising corporate capital expenditure and less reliance on US central bank stimulus.

He predicted the world's biggest economy, the US would grow about 3.4% this year and that US Federal Reserve would conclude its program of quantitative easing in October.

He tipped the world's second largest economy, China, to make its official target of 7.3% to 7.4% growth as the world's third largest economy, Japan, grows at an annual rate of 2.3% to 2.5%.