Chinese investors slash home buying as offshore funding for Aussie homes plunges $1.3bn: Foreign Investment Review Board

Chinese investors’ interests in Aussie homes have taken an almost $1bn cut — and Prime Minister Anthony Albanese is copping the blow back, amid stark warnings over the nation’s housing crisis.

The Albanese government has copped a more than $1bn blow to its 1.2 million new homes in five years goal after international investor activity plunged in the past year.

Foreign Investment Review Board data has revealed offshore buyers spent $6.6bn on Aussie homes in the past financial year.

But the figure is $1.3bn below the $7.9bn in capital that poured into the nation in the prior year, with $800m of that fall caused by reduced sales to China-based investors.

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International investors approved to purchase properties by FIRB cannot purchase existing homes, and so are credited with driving new construction of properties.

The federal government is in the midst of a National Housing Accord attempt to build 1.2 million homes by mid 2029, with the Housing Industry Assocaition recently warning that it was on track to build fewer than a million homes in the timeline.

The plan is a cornerstone of the Albanese government’s efforts to address Australia’s housing and rental affordability crisis.

HIA chief economist Tim Reardon said with Australia building close to 120,000 apartments in 2015, before significant taxes and levies were added to international property purchases by state and federal governments, it was clear the nation could reach the 240,000 homes a year.

This is the amount needed to reach the federal goal.

However, the economist said it could not be done without more international funding.

“For every dollar of foreign investment we lose, it makes it increasingly unlikely we will meet that 1.2 million home target,” Mr Reardon said.

“And no amount of investment in building new public homes will make up for that loss of foreign investment.”

With the vast majority of international buyers never coming to Australia, the economist said most international purchasers would ultimately support the rental market.

HIA Chief Economist Tim Reardon during the Housing Industry Association breakfast at the Brisbane Convention and Exhibition Centre. Picture: Tertius Pickard

Mr Reardon added that it was “perverse” that on one hand governments were calling for more homes to be built around the nation, while on the other they were disincentivising a key source of capital with heightened taxation.

Oxford Economics head of property and building forecasting Timothy Hibbert said while the loss of more than $1bn in capital from foreign investors wasn’t ideal, the level of international funding coming into Australia’s housing market was now so low that they didn’t see it as core to their forecasting.

However, Mr Hibbert warned that the reduced levels of foreign capital came with further impacts to Australia.

“You are not getting as much cash for governments out of these investors as you were (from taxes),” Mr Hibbert said.

“And quite a few Chinese builders have liquidated assets in Australia, too.

“So there’s definitely fewer developers now building in Australia over all, and in the relativitives there are even fewer internationals. That’s because they are finding it harder to sell to their home market.”

However he warned that while international funding had been vital to the nation’s apartment-building boom a decade ago, turning the tap back on now might be very difficult — particularly with other issues impacting the availability of funds from some nations.

The economist said the government now had no choice but to concentrate on local buyers and finding ways to tackle problems stemming from the heightened cost of building homes.

The data revealed in FIRB’s latest report shows who the biggest investors in Aussie homes are, and how much they’re spending.

Mr Hibbert noted that while China was facing challenges at home, including the collapse of several major building firms, it was clear no other nation had stepped into the gap they had left — which was not good news for building more homes.

He estimated that the loss of close to $1bn in foreign capital could be the difference in as many as 1000 homes being built, which was a small segment of the National Accord — but demonstrated the vast amounts of funding needed to achieve it.

The head of the nation’s top housing lobby group has also warned the loss of foreign capital could be a major concern for government plans to build the nation out of its housing crisis.

Real Estate Institute of Australia president Leanne Pilkington said it wasn’t a surprise to see China pulling back, given the nation’s ongoing property industry problems at home.

One of the nation’s biggest developers, Evergrande, collapsed early in 2024.

But with property experts nationwide warning Australia needs more foreign capital to bolster its housing supply and address an affordability crisis, Ms Pilkington said the reduction was cause for concern.

“This is certainly not ideal,” she said.

Real Estate Institute of Australia president Leanne Pilkington said the loss of funding for new Aussie home construction is “certainly not ideal”.

The FIRB stats released this month also show commercial real estate transactions have been cut in half in the past financial year, plunging from $50.2bn to just $23.3bn. The figure was more than $63bn in the 2021-2022 financial year.

Buyers from mainland China were the biggest spenders on Australian homes, shelling out $2.6bn across 1998 purchases nationwide.

But it’s well below the $3.4bn they spent on 2601 homes in the 2022-2023 financial year.

Ms Pilkington added that the huge reduction in international spend on commercial property was also unsurprising as she was hearing anecdotally that Australia’s pivot to a more work-from-home friendly environment was leaving the commercial market in an adjustment phase around major capitals including Melbourne and Sydney.

A $400m spend on 409 homes made by Hong Kong-based investors was the second biggest figure recorded, followed by Taiwan and Vietnam with similar amounts of money spend though on fewer homes.

The amount of money being spent on Australian homes from offshore investors has plunged more than $1bn in a year.

There were 550 transactions approved for Indian investors, worth a combined sum that was also close to $400m.

Residents of Nepal, Indonesia, the United Kingdom and Sri Lanka rounded out the 10 biggest spenders on Aussie homes in the three months to June 30.

The decline in transactions comes after May 1 changes to streamline and strengthen the framework around foreign investment in Australia, including boosting the government’s ability to impose conditions on investment, to prohibit an investment and even to unwind transactions if it deemed there were issues relating to Australia’s national interest.

Latest realestate.com.au data shows that residents of the UK and New Zealand looked at the most homes on their website in June, followed by the US which has since surged to top spot in July.

Searches coming out of China have declined, though analyst Karen Dellow noting there had been an overall 3 per cent lift in international searches for Australian homes in the past year in their latest figures.

It is believed that Melbourne is attracting the largest share of foreign investment in residential property. Picture: Jason Edwards.

Separate figures from Juwai.com, an online portal for international real estate, show that Melbourne had attracted 30 per cent more inquiries coming out of China than Sydney in 2023. A year prior it was 17 per cent.

Perth was next on the list, followed by Brisbane and Adelaide.

However, Juwai IQI co-founder Daniel Ho said most of the parties they encountered indicated they were looking for a home for their own use, suggesting foreign investors interest in Australia was now almost non existent compared to its peaks in 2014-2018.

Mr Ho added that he believed the reduction in purchases out of international buyers recorded by FIRB was coming as a result of affordability — with some international banks offering interest rates two percentage points higher than Aussie lenders.

“And foreign buyers pay much more to purchase and to hold property in Australia than local residents and citizens,” he said.

“They have extra taxes, fees, and duties that local buyers don’t have to worry about. Even the interest rates they pay on their mortgages are higher because they can’t borrow from the big four banks.”

Mr Ho added that the decline was even more pronounced long term, with $8.4bn approved by FIRB in the past three years — compared to $126.2bn in the decade to June 30, 2021.

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Originally published as Chinese investors slash home buying as offshore funding for Aussie homes plunges $1.3bn: Foreign Investment Review Board