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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.

โ€œAt 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.

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

โ€œIn 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.โ€

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, Domainโ€™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.

โ€œFollowing the announcement from Chinaโ€™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,โ€ Domain Chief of Research and Economics, Dr Nicola Powell, said.

โ€œUniversities 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.

โ€œThis is already playing out as weโ€™ve seen a spike in searches for rentals from China on Domain.โ€

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.

โ€œForeign buyers get a bad rap from the mainstream media because theyโ€™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 didnโ€™t have foreign buyers, because of how much they rely on pre-commitments.ย 

โ€œWe also have shortages of rental housing and foreign buyers are definitely one source of that.โ€

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