Even before the COVID-19 pandemic disrupted markets across the globe, foreign investment in Australian property was already down in 2018-19 from the year before.
While the purchasing of new dwellings only decreased by 5.9%, vacant land acquisitions were down 22.6% and established dwellings dropped 20.1% year on year, according to the most recent report from Australia's Foreign Investment Review Board (FIRB).
The data also revealed foreigners buy to hold, with the market segment having purchased $7.5bn of property over the 12 month period, but only selling property worth $990m. Of the foreign buyer transactions, 80% were residential and valued under $1m each. The properties were primarily located in Victoria, New South Wales and Queensland – states which accounted for 94.6% of investment value and 92.2% of transactions.
What does the data mean for foreign investment moving forward?
According to Juwai IQI executive chairman Georg Chmiel, it’s not all bad news.
"Although foreign-buyer transactions are down, 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,” he explained.
“Australia competes 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 U.S. and the U.K.”
However, in the short term, the spring market seems set to suffer this year.
"Our data shows there are fewer Chinese, fewer Koreans and fewer Indians looking at Sydney real estate because travel is so difficult... transactions have dropped precipitously due to travel bans and other practical difficulties,” Chmiel said.
"Chinese buyer enquiries climbed in Q2 only to fall again in Q3.”
Fortunately, there is some hope in that China's economy is also proving resilient to the virus.
“[Chinese] buyers have money and motivation, and Australia's reputation and desirability have soared due to its impressive response to the pandemic,” said Chmiel.
"So, while Chinese buying is down, it will be back. 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.”
