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Foreign real estate investors tipped to favour Australia over UK and US

“Australia’s reputation has been buffed and shined to a new level of polish.”

Australia’s Foreign Investment Review Board has released data on foreign buyer transactions in 2018-19 that reveals where foreign investors buy residential real estate, and what types of properties they prefer.

Insights into foreign purchases and sales of residential real estate 2018-19 shows that during FY19, the total number of residential real estate purchase transactions with “a level of foreign ownership” was 9295, with a value of $7.5 billion.

Overall there was an 11.4 per cent reduction in the number of purchase transactions and 11.8 per cent reduction in the value of transactions when compared to 2017-18.

This suggests that the current drop in foreign real estate investment, while driven primarily by COVID-19 and border closures, is consistent with the downwards trend in play prior to this.

Not surprisingly, Victoria, New South Wales, and Queensland represented 92.2 per cent of all purchase transactions, making up 94.6 per cent of the total value of purchase transactions.

New dwellings represented 68.9 per cent of purchase transactions, followed by 17.4 per cent for vacant land, and 13.7 per cent for established dwellings in 2018-19.

As in 2017-18, the majority of new dwelling purchases were made in NSW during 2018-19, with Victoria drawing the most vacant land and established dwellings purchasers by foreign interests.

Interestingly, residential properties with values under $1 million made up 79.8 per cent of property transactions in 2018-19.

There were 1874 purchase transactions for properties valued greater than $1 million in 2018-19.

Australia’s reputation and desirability have soared

Juwai IQI Executive Chairman Georg Chmiel said: “The FIRB data is fascinating and confirms some things that we already know”.

“Victoria is the most popular state. When foreigners buy, they very seldom sell. Foreign buyers by far prefer new property.”

Mr Chmiel notes there are “fewer Chinese, fewer Koreans, fewer Indians” looking at Sydney real estate due to travel difficulties.

“That’s a big problem for the market in newly developed apartments.

“Although foreign-buyer transactions are down, there is also good news,” he continues.

“Australia’s reputation has been buffed and shined to a new level of polish. The country is wisely managing the pandemic and is likely to have positive economic growth this year despite the crisis.

“Australia does compete for investment with the other primary English-speaking countries. We believe 2020 will be a pivot point, after which demand by foreign investors, students, and residents will climb in Australia at the expense of the US and the UK.

“The good news about Chinese real estate investment is that China’s economy is doing well, buyers have money and motivation, and Australia’s reputation and desirability have soared due to its impressive response to the pandemic.

“Not to make light the difficulties facing anyone who is having a hard time in Australia, but there are much worse places to ride out a global pandemic.”

Mr Chmiel explains how any foreign buyers IQI have sold to tend to already be in Australia, or willing to buy sight unseen.

“Chinese buying is down, but it will be back,” he predicts.

“That’s good news for the unprecedented surplus of new housing stock, especially inner-city apartments of the kind that appeal to buyers from Asia.”

While he admits it’s too soon to know for sure, Mr Chmiel is watching Victoria and Queensland with interest.

“The two states have had opposite fates this year, and it is too soon to know if that will affect their desirability with international students, migrants, ex-pats, and buyers. Will Victoria lose it’s top ranking?

“Will Queensland finally match its southern neighbours? I don’t yet know.

“It is plausible that Queensland will see an increase in international buyer market share due to its affordability, lower congestion, and good handling of the coronavirus.”

The breakdown of purchase transactions by state or territory

  • Victoria had 3768 transactions with 661 valued at more than $1 million and was the top state for established dwellings and vacant land.
  • New South Wales had 3151 transactions with 1034 valued at more than $1 million and was the top state for new dwellings.
  • Queensland had 1648 transactions with 128 valued at more than $1 million.
  • Western Australia had 344 transactions with 32 valued at more than $1 million.
  • South Australia had 201 transactions with 15 valued at more than $1 million.
  • Tasmania had 107 transactions and less than five transactions valued at greater than $1 million.
  • The Australian Capital had 67 transactions and less than five transactions valued at greater than $1 million.
  • The Northern Territory had nine transactions and zero transactions valued at greater than $1 million.

    Of the purchase transactions, 79.8 per cent were for properties with values under $1 million.

New dwellings

  • New South Wales had 2832 transactions with a value of $2.8 billion .
  • Victoria had 2247 transactions with a value of $1.6 billion.
  • Queensland had 1054 transactions with a value of $695.2 million.
  • Western Australia had 145 transactions valued at $79.7 million.
  • South Australia had 72 transactions valued at $38.3 million.
  • The Australian Capital Territory had 42 transactions valued at $21.5 million.
  • Tasmania had 13 transactions valued at $6.2 million.

Vacant land

  • Victoria had 956 transactions valued at $340.6 million.
  • Queensland had 379 transactions valued at $144.5 million.
  • New South Wales had 149 transactions valued at $90.4 million.
  • Western Australia had 68 transactions valued at $26.8 million.
  • South Australia had 36 transactions valued at $12.7 million.
  • Tasmania had 23 transactions valued at $4.7 million.
  • The Northern Territory had less than five transactions.

Established dwellings

  • Victoria had 565 transactions valued at $899.7 million.
  • New South Wales had 170 transactions valued at $310.9 million.
  • Queensland had 215 transactions valued at $194.5 million.
  • Western Australia had 131 transactions valued at $101.8 million.
  • South Australia had 93 transactions valued at $60.5 million.
  • Tasmania had 71 transactions valued at $34.4 million.
  • The Northern Territory had seven transactions valued at $2.4 million

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