Foreign investors abandon Aussie property market

Investment in Australian residential property by foreign investors fell by 11% between the 2018 and 2019 financial years, according to figures from the Foreign Investment Review Board.

The 11% fall occurred before the COVID-19 pandemic hit.

The FIRB’s figures reflect a trend towards buying brand new properties over existing ones, along with a growing interest in more expensive properties:

New figures obtained from the Foreign Investment Review Board by The Australian show a fall-off in purchasing by foreigners of 11 per cent between the 2018 and 2019 fiscal years to 9295 sales valued at $7.5bn.

A drying up of project launches in the wake of the pandemic is likely to drive down building numbers further, with border closures stripping away demand…

The report confirmed a trend towards brand new over established property alongside an increasing interest in higher end purchases, with the median price of purchases over $1m up 1.6 per cent to account for one in five sales in the 2019 financial year…

“The bad news is that transactions have dropped precipitously due to travel bans and other practical difficulties,” [Executive chairman of Chinese property portal Juwai IQI Georg Chmiel said].

“Transactions do happen. But the only foreign buyers making purchases are in Australia or are willing to buy sight unseen.”

Strangely, during the recent shutdowns, the NAB Property Survey reported increased foreign buyer activity though it was very narrow, focussed on VIC which was shut!

While the prominent role played by foreigners in Australian housing markets has dissipated in recent years, market share in this buyer group in Q2 increased in both new and established housing markets. In new property markets, their overall market share increased to a 2-year high 8.3% (6.6% in Q1) and to 3.1% in established housing markets (from a survey low 2.4% in Q1). But buying activity is still below survey average levels in both markets.

In new property markets, the share of sales to foreign buyers jumped noticeably in VIC to an above average 19.3% (12.4%) and has continued the rising trend seen in the past 3 surveys. Market share of foreign buyers in new property markets fell in all other states. It fell to 2.5% in NSW (4.6% in Q1; average 9.1%), 6.4% in QLD (9.7% in Q1; average 12.0%) and 1.7% in WA (4.0% in Q1; average 6.3%).

In established housing markets, foreign buyers accounted for a larger share of sales in VIC (4.8% vs. 2.3% in Q1), NSW (3.4% vs. 2.8% in Q1) and QLD (2.3% vs. 1.6% in Q1), but a smaller share in WA (2.2% vs. 3.8% in Q1). The share of foreign buyers however remains below survey average levels in all states.

Perhaps it was a bit of Hong Kong spillover.

Anyway, with borders likely to remain closed for the foreseeable future, and Australia and China locked in a cold war, it’s hard to see foreign demand rebounding to former levels anytime soon.

Unconventional Economist
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Comments

      • Less Woke More Bloke

        Oh well it’s lucky you’re a subscriber, then, because I’m sure it will be attended to.

        And by attended to, I mean it won’t be.

        I mean, what else is the eye watering membership for, if not to demand a release from detention of your carefully-crafted and incisive comment!

        I demand satisfaction! Heads must roll!

  1. PaperRooDogMEMBER

    High rise Harry helping mates in these uncertain times or Aussies of convenience wanting to get a foot on the ladder as they return?

  2. Local banks are pumping credit to make up for any shortfall. RBA says speculation and asset price bubble are a good thing now.

    • Yep, I’m not seeing this as a problem. The property market will now be sustained by property MMT. So there will be no problems.

  3. I do wonder about all the Chinese investors who piled in in the last 3 years. As each day goes by, more and more will be underwater. Do they not care or it is like any laundering deal – if you can get 80% of the money out the other side cleanly, you are still doing well?

    • boomengineeringMEMBER

      There was a customer in there today that asked if I was in finance,” nope ,engineering” then explained my interest in macro economics. (asked which blog as well). Then I said I was a bit hesitant about the yellow stuff as the price had escalated this year. He said that it would skyrocket soon following a pattern in the last 100 yrs or so. He was buying the silver stuff for the same, my hesitant reason.
      btw I am and look the antithesis of a finance worker, and a complete novice to boot (except for non precious metals)

      • I own enough to be content if it moons, but will buy more if there’s another stock market rout.
        Did you commit to the cold hards? I’d be buying silver at this GSR.

        btw, If you’ve got like a 10oz/1kg bar, drop a cube of ice on it.

        • boomengineeringMEMBER

          That last comment went straight overhead.
          I did mention I’m a complete novice, just testing the water one toe at a time.
          That happens to be. my style take the drop (surf) then deal with the consequences to learn.

          • moons = price to $1000 or whatever.
            GSR = gold / silver price ratio

            btw, If you’ve got like a 10oz/1kg bar, drop a cube of ice on it. Silver is super conductive and the ice will melt faster than you expect.

            I’d buy 10 oz bars, lower premium, still easy to offload.

  4. Any uptick in property purchase from foreigners with our borders closed must be either
    Aussies of convenience coming back here after geting citizenship then returning to live at the place they were running from (read fake refugees) or more the china spies who will be arriving soon as fake Hong kongers leaving Hong Kong.

  5. Australia, NZ and Canada are all the same when it comes to foreign capital. Highly attractive places to stash cash in property if you have it to stash. Stable economies, good environment relative to other places, corrupt but democratic governments and safe.

    Until laws are changed preventing foreigners buying, whenever a good buying opp presents then money will come in. I would rather we put the “Full” sign on the door, welcome short term friends and visitors but cap the population and the sale of local assets to the locals.

    Cannot see it happening without the revolution, maybe it will come if there is enough pain.

  6. The uptick in percentage terms in Victoria could be due to local sales falling off a cliff. Lockdown makes no difference to the foreign buyers who couldn’t see the property anyway.