Foreign investment is down, but for how long?

Foreign investment in Australian real estate fell over the last quarter, but a recent uptick in enquiries from Chinese buyers suggests the downturn will be short lived.

The total value of foreign investment in the residential sector during the December quarter was $1.4 billion, down from $2.9 billion the previous quarter, Treasury reported.

China was the largest source of investment for residential real estate investment proposals by number and value ($0.6 billion).

The next two largest sources of residential investment were Hong Kong ($0.1 billion) and Vietnam ($0.1 billion).

Co-Founder and Group Managing Director of Juwai IQI, a company which sources foreign buyer leads, Daniel Ho said that taken as a yearly figure, Chinese investment would increase this financial year.

“At this rate, China will invest an estimated $3.2 billion in Australian residential real estate this year, which would be up from $2.4 billion in 2021-22,” he said.

“With the inclusion of Hong Kong, China would invest $3.8 billion, which would be up from $3 billion last year.”

Mr Ho said that Australia remained a popular destination for Chinese buyers, despite speculation that Australia and China’s economy had undergone a decoupling.

He said that this was particularly evident in his company’s recent enquiry data.

“In 2022 and so far this year, Australia is the most popular country for Chinese homebuyers, for the first time ever,” Mr Ho said.

“In January, Chinese buyer enquiries for Australian real estate surged by 24 per cent compared to December, due to the announcement that borders would be reopening.”

The data comes as Domain recently reported a strong uptick in rental searches emanating from China.

The Chinese government recently announced that students would need to return to physical campuses.

Since the announcement, Domain’s unique search data saw the number of searches from China for rentals jump 87 per cent compared to December and 175 per cent annually.

“Following the announcement from China’s Ministry of Education banning citizens from studying online at foreign universities, Chinese students have been left scrambling to secure a visa and find somewhere to live,” Domain Chief of Research and Economics, Dr Nicola Powell, said.

“Universities Australia said that this move would encourage some 40,000 Chinese students to return to Australia, which will put huge pressure on an already stretched rental market.

“This is already playing out as we’ve seen a spike in searches for rentals from China on Domain.”

While foreign investors often get a bad rap in the mainstream media, Ray White Chief Economist Nerida Conisbee recently told Elite Agent that they were a positive for increasing housing supply.

Ms Conisbee said buyers from overseas who purchase new Australian homes benefitted the education, construction and rental sectors.

“Foreign buyers get a bad rap from the mainstream media because they’re seen as pushing prices up, but the reality is most apartments in places like North Ryde, Parramatta and the Melbourne CBD would not have gotten up if we didn’t have foreign buyers, because of how much they rely on pre-commitments. 

“We also have shortages of rental housing and foreign buyers are definitely one source of that.”

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