Property market surges as wealthy Chinese seek to escape scrutiny

More wealthy Chinese are moving their money out of China to invest in Australia's property market as a corruption crackdown in the world's second-largest economy gathers momentum, according to property consultants and lawyers.

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They said their clients have told them they have legitimate funds to invest but were concerned about being caught up in an investigation that could include dozens of associates of the main target.

David Green-Morgan, global capital markets research director at real estate services firm Jones Lang LaSalle, told Reuters, "What we see at the moment is that there are more Chinese who would likely send more money out of the country so they don't get caught up in this crackdown."

It's one of the most visible signs of the fear of President Xi Jinping's 18-month-old drive against the pervasive graft that he says threatens the Communist Party of China's survival.

Beijing's campaign has particularly targeted "naked officials", the term for State employees whose spouses or children live overseas. The Party often suspects such officials of using such connections to illegally move assets.

Ordinary Chinese citizens can legally transfer only $50,000 overseas each year, but vast sums leak out of China through a variety of loopholes, such as funneling money through Hong Kong.

"The restrictions in China are becoming more onerous," Green-Morgan said. "That's triggered an increase in the amount of money that's looking to move out of China or probably is already outside of China and is looking to be spent."

Haven for funds

Australian property has long been a popular choice for Chinese money - both legitimate and illegitimate - but the flow of investment appears to have accelerated.

According to Australia's foreign investment review board, China was the top source of foreign capital investment in Australian real estate in 2013. Chinese citizens received approvals to invest nearly $5.58 billion into the sector, up 41 percent from a year ago.

"They are worried, so they are looking for a safe place," said a Sydney-based immigration lawyer, who is advising on setting up a new fund exclusively for Chinese investors and regularly travels to Beijing and Shanghai.

"They don't want returns, not necessarily. They want a safe place to park their funds," he added.

China is expected to see an annual growth of 20 percent in outbound real estate investment in the next decade, up from $11.5 billion last year, property agent Savills has forecast.

That will help push up Chinese demand for Australian property by 15 percent over the next 12 months, said Andrew Taylor, co-CEO of Juwai.com, the largest real estate portal that targets Chinese buyers looking abroad.

Such strong interest is likely to boost Australia's apartment construction, which is set to hit record levels by 2017 and remain elevated through to 2020, Brokerage CLSA said this month.