Foreign Investment in Australia’s Property Market on the Rise

Foreign investors have been flocking on the Australian shores since 2010, and this trend is showing no signs of slowing down in 2015 despite the already sky-rocketing prices of properties in Australia, particularly in major cities such as Sydney, Melbourne and Brisbane.

As of the September 2014 quarter, foreign demand for new homes surged to a new high, accounting for almost 17% demand for new properties across the country. They were also more active in the established property sector in the same quarter, accounting 8% of the demand, according to National Australia Bank’s residential property survey.

“Foreign buyers accounted for 16.8% of total demand for new property in Q3, or about 1 in 6 of all buyers, with this share tipped to rise to 17.3% over the next year. Foreign buyers were more active in all states, but especially in Victoria where they accounted for an estimated 24.8% of total demand, or 1 in 4 all new property sales”, said NAB Group Chief Economist Alan Oster.

Are foreign investors making home ownership difficult for first-time Aussie homebuyers?

While the number of foreigners who invest in Australian properties is increasing, first homebuyers are becoming less active. Victoria felt the decline sharply, with its first timers making up only 15% of the market in the third quarter—a sharp fall from 22.5% in the second quarter.

In a recent Australian Property Institute’s survey, 96% of property analysts working at Australia’s biggest banks and property development companies believe that foreign investment is the main driver of soaring property prices in the capital cities, criticising the Foreign Investment Review Board for failing to enforce their rules, particularly in restricting the type of properties foreigners can buy.

The Australian Bureau of Statistics issued a warning though, noting that the number of first Australian homebuyers maybe under-reported compared to foreign investors because the figures were based on the first home buyer grants alone. Some economists and real estate analysts also cautioned about blaming foreign investments, emphasising the need for more research into the issue.

Oster explained that first home buyers and foreign buyers are not in competition for properties in Australia, because the latter have their eyes on high-end homes and apartments. “They’re not buying cheap stuff,” he remarked.

The result of the parliamentary inquiry into foreign real estate investment is due to be released this month, so keep a tab for update. In the meantime, visit invest Australia properties for more investment tip and sign up to receive our free e-book.