Why foreign buyers of Australian property are falling away

The number of Australian homes purchased by foreign buyers fell in the most recent quarter as high stamp duty costs deterred investors.

However, a surge in interest is possible ahead of an April 1 deadline for international buyers who may want to buy established homes.

International property buyers face rules about what they can buy.Credit: Dion Georgopoulos

The number of approved residential real estate investments by overseas buyers dropped 6.3 per cent to 1123 in the September quarter, from 1199 in the previous quarter, figures from the Foreign Investment Review Board show.

It follows a drop in approved residential investments of 15.1 per cent to 5581 in financial year 2024.

The value of approved residential investments also fell to $1.3 billion in the quarter, from $1.4 billion in the previous quarter.

China was the top source of residential real estate investment by value, at $400 million in the September quarter, followed by about $100 million each for Taiwan, Hong Kong, Vietnam, Indonesia, India and Singapore.

Buyers who are not Australian citizens or permanent residents face restrictions: foreign investors are limited to new dwellings or off-the-plan sales, to help boost Australia’s housing stock.

Temporary residents have been able to apply for approval to buy an established home to live in for the duration of their stay, or buy an established home for redevelopment if it increases the housing stock.

But from April 1, the federal government will ban foreign purchases of established homes for at least two years.

Fiona Yang, executive partner of project marketing agency Plus Agency, expected international purchases from China to drop again in December given the seasonal timing of holidays.

But she thought the upcoming ban could drive a broader surge in foreign buyers ahead of the deadline.

“They worry that this is their last chance to buy,” she said in a statement. “It is true the letter of the law doesn’t ban purchasing of new homes, but many buyers only see the headline.

“Many unscrupulous agents are using the ban as a selling point to urge buyers to move quickly.”

In Melbourne, Belle Property director Robert Ding has noticed more buyers coming through open houses who require FIRB approval before the cut-off.

But he thought the longer-term decline was due to Victoria introducing a stamp duty surcharge of 8 per cent.

“Where we work, the average sale is about $2 million. When you’re spending that sort of money, it’s quite a lot,” he said.

Instead, new arrivals rent or buy a lesser-value property, apply for permanent residency, then buy their family home, he said.

In Sydney, OH Property Group co-founder and principal buyer’s agent Henny Stier is noticing fewer overseas buyers as the economy in mainland China falters, but thought there could be a bump soon.

She thought NSW’s 9 per cent stamp duty surcharge was a deterrent and many families aim to get permanent residency before buying.

“But certainly from a lifestyle perspective, Australia is seen as very favourable, and our climate is good,” she said.