Foreign investors desert Australia

Investment in Australian residential property by foreign interests plunged by $1bn before the pandemic struck and is set to worsen from new rules: industry experts.

Ray White agent Sam Guo at a property he is selling for over $4 million in Sorrento on the Gold Coast. Picture: Lyndon Mechielsen

Investment in Australian residential property by foreign interests plunged by $1bn even before the coronavirus crisis struck and is set to worsen from new rules and stamp duty regimes, major industry players say.

New figures obtained from the Foreign Investment Review Board by The Australian show a fall-off in purchasing by foreigners of 11 per cent between the 2018 and 2019 fiscal years to 9295 sales valued at $7.5bn.

A drying up of project launches in the wake of the pandemic is likely to drive down building numbers further, with border closures stripping away demand.

A big fear is emerging that without an ongoing stream of project launches, both domestic and foreign purchasing will worsen and more construction jobs will be lost, particularly in Sydney and Melbourne.

Former Macquarie Bank property boss Bill Moss criticised the federal government’s decision in March to launch a review of the FIRB at such an uncertain economic time, suggesting it would make it difficult for some industries to operate.

“We can’t say we want to increase exports and then make it difficult for people to invest. It’s the biggest mistake we’re making at the moment for the medium term,” said Mr Moss, chairman of Boston Capital.

“I scratch my head and say, ‘Well, you know what, this wasn’t the time to play with FIRB’. Or, if you’re going to have a play with it, work out what you’re going to do and do. Don’t muck around for 12 months.

“That’s a big issue because it’ll filter right down and it will affect real estate. Everything relating to jobs affects real estate.”

The report confirmed a trend towards brand new over established property alongside an increasing interest in higher end purchases, with the median price of purchases over $1m up 1.6 per cent to account for one in five sales in the 2019 financial year.

Realestate.com.au data analyst Karen Dellow said demand through search from Hong Kong and the US had remained up year on year despite the border closures, likely from expats looking to return home. “Inner-city apartment developments, with luxury penthouse offerings, remain popular with overseas searchers,” Ms Dellow said.

“Property seekers from Hong Kong are attracted to the higher priced apartments in Melbourne and the increase in activity from the US is driving interest in luxury apartments in Sydney.”

Interest from China has waned significantly, however, with a 49 per cent year-on-year fall in searches in September.

Executive chairman of Chinese property portal Juwai IQI Georg Chmiel said despite many cashed-up mainland buyers wanting to purchase in Australia, given its strong reputation and virus response, the practicalities of doing so had made it difficult.

“The bad news is that transactions have dropped precipitously due to travel bans and other practical difficulties,” he said.

“Transactions do happen. But the only foreign buyers making purchases are in Australia or are willing to buy sight unseen.”

Warmer waterfront locations such as Byron Bay and the Sunshine Coast have proved more popular over the COVID period than Sydney and Melbourne. The Gold Coast prestige market is also roaring among the Chinese community. Local Ray White agent Sam Guo and business partner Julia Kuo have been making sales with Australian-based Chinese buyers via WeChat through the pandemic.