Foreign buyers: Billions slashed from offshore investment in Victoria
The amount foreigners were approved to splash on Victorian homes has plunged $24 billion in a few years, as a once big-buying nation dropped off — but there are signs they’re “back”.
Foreign buyers were given the go ahead to spend $3.9 billion on Victorian residential real estate in the 2018-19 financial year — a dramatic $24 billion drop from the record amount approved three years prior.
Chinese investment in residential and commercial real estate Australia-wide also fell more than 50 per cent year-on-year to hit its lowest level since FY2012-13, according to the Foreign Investment Review Board’s latest annual report.
The Chinese were approved to spend $6.07 billion in 2018-19, putting them behind purchasers from the US ($19.56 billion), Canada ($13.3 billion), Singapore ($9.8 billion) and Hong Kong ($9.33 billion).
Despite this, leading international property website Juwai IQI said Chinese buyers had been mounting a comeback in 2020, with Melbourne their No. 1 Aussie target.
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The FIRB report revealed Victoria remained Australia’s most popular state among all offshore residential property buyers in 2018-19, despite approved investment plunging from a peak of $28 billion in 2015-16.
The state’s 3163 approved applications to buy new and existing homes, vacant land and properties for development, worth $3.9 billion, made up 42 per cent of the nation’s 7513 authorised purchases, which were worth $14.8 billion.
Accruing the next biggest shares were Queensland (1343 approvals worth $1.3 billion) and New South Wales (1337, $3.1 billion).
Nationwide, the number of authorised purchases declined by 2523 annually, but the total value rose by $2.3 billion.
The report attributed the fall in approval volumes to “foreign investment application fees, a tightening of domestic credit and increased restrictions on capital transfers in home countries, and state taxes and foreign resident stamp duty increases”.
Another factor was the introduction of an exemption certificate that allowed buyers looking at several properties, but with the intention to purchase only one, to obtain a single broad FIRB approval, rather than several approvals.
Juwai IQI executive chairman Georg Chmiel said Chinese investment in Victoria had plummeted since 2016 because “Australian banks stopped lending to Chinese buyers, the Victorian government imposed a steep foreign buyer stamp duty, and Beijing started cracking down on the movement of money out of China”.
But he noted those factors had “started to unwind”, with non-bank lenders again willing to finance the Chinese, Victoria’s 8 per cent stamp duty now paling in comparison to Singapore and Canada’s 20 per cent taxes, and many Chinese accumulating enough overseas wealth to invest outside of their country.
In April, Chinese buyer inquiries on Victorian homes via Juwai IQI doubled compared to every other month of 2020, and were up 50 per cent on every month in the second half of 2019.
“The data shows Chinese buyers are back,” Mr Chmiel said.
He said their suburbs of choice included the Melbourne CBD, Point Cook, Doncaster, Southbank, and Toorak, and they preferred newly-built units or houses valued sub-$1 million and close to good schools and universities, transport and shops.
FIRB also found Victoria was Australia’s top state for rule breakers, accounting for 42.66 per cent of the 600 property sales that were found to have breached the nation’s foreign investment rules from 1068 completed investigations.
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Originally published as Foreign buyers: Billions slashed from offshore investment in Victoria