Why China could be about to hurt Australian house prices even more

China could be about to hurt Australian house prices even more with another increase of capital controls.

The Chinese were supposedly one of the biggest buyers of Australian property in the last few years. They wanted a safer place to keep all of their money. They didn’t want to keep it in China where the Chinese Government could potentially get at it.

The Chinese much prefer property investments to equity investments, which still ended up benefiting Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) thanks to the growth of property prices.

China didn’t want all that money leaving the country to buy foreign property, so it implemented capital controls were only US$50,000 could leave the country per person per year.

People then used methods like cryptocurrency and pooling quotas to get the money out of China. For example, 10 people could get US$500,000 out of the country. However, the AFR is reporting that China is now making examples of people who flout the laws.

Two Chinese economists that the AFR spoke to said that the tight controls on capital could remain in place for another one to five years. That’s a long time to take a swathe of buyers out of the property market!

We have seen recently with Crown Resorts Ltd (ASX: CWN) and Bellamy’s Australia Ltd (ASX: BAL) how action by the Chinese officials can quickly have a negative effect in Australia.

Foolish takeaway

I think this goes to show that tailwinds can soon become headwinds if they don’t seem like assured tailwinds. This is yet another reason why I think investment property isn’t a good idea right now. I’d much rather buy quality growth shares like Costa Group Holdings Ltd (ASX: CGC) for my portfolio.

Another quality stock that is a far better idea than property is this market-leader which grew profit by 30% in just one year.

The best dividend stock to buy for next month

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor Tristan Harrison owns shares of COSTA GRP FPO. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and Crown Resorts Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.