The Foreign Investment Review Board (FIRB) has released its Annual Report for 2013-14, which registered an explosion of applications from foreigners to purchase Australian real estate.
According to FIRB, there was a 94% increase in real estate approvals in 2013-14, which nearly doubled to 24,000 (see next chart).
The lion’s share of these were in the sub-$1 million category, almost all of which was residential (see below tables).
Total approved investment in real estate rose nearly 50% in 2013-14 to $74.6 billion in 2013-14 (compared with $51.9 billion in 2012-13).
Worryingly, there was a 55% increase in foreign approvals for existing real estate, from 5,091 to 7,915, with an average value of $906,000 (see below table).
More encouragingly, since it at least adds to supply, foreign approvals for new dwellings jumped 220% to 14,591 in 2013-14, versus 4,549 in 2012-13.
Victoria and New South Wales (read Sydney and Melbourne) lead the charge, which is not surprising given they are also the two hottest real estate markets (see next table).
Meanwhile, for the first time China was the biggest source of foreign investment in Australia, mainly driven by a large increase in residential real estate approvals.
It is worth pointing out that this data likely significantly understates the true level of foreign investment into Australian real estate, particularly in existing dwellings.
As noted by the chair of the parliamentary inquiry into foreign real estate investment, Kelly O’Dwyer, the systems and data on foreign transactions is woefully inadequate and FIRB do not know the true levels:
“I regard the current internal processes at the Treasury and FIRB as a systems failure. Most concerning is that sanctions seem to be virtually non-existent. There have been no prosecutions since 2006 and no divestment orders since 2007. Suggestions by officials, that this is due to complete compliance with the rules is simply not credible. The data on foreign purchases of Australian houses and apartments is inadequate, making policy evaluations very difficult”…
I personally have had ‘off-the-record’ discussions with real estate agents who have confirmed that illegal purchases are commonplace, with buyers often paying with ‘suitcases of cash’.
Until the Abbott Government implements the recommendations of the O’Dwyer inquiry’s recommendations in full, Australia is flying blind on foreign investment into Australian established real estate.