Foreign buyers are continuing to show strong interest in Melbourne and Sydney properties.
But there are a few misconceptions about this interest that need to be addressed.
In his recent column in Switzer, John McGrath takes a look at exactly what has piqued foreign buyer interest and who it actually affects.
Here’s what he had to say:
Sydney and Melbourne are the top two cities on foreign buyers’ shopping lists.
Foreigners moving here themselves go for prestige homes in premium suburbs, while those purchasing purely for investment go for newly built or off-the-plan properties as they are limited by FIRB rules that restrict them to buying new properties only.
Given the growth in property prices over the past three years in Sydney and Melbourne (up 43.1% and 25.9% respectively since May 2012, according to CoreLogic RP Data), Australian buyers are finding it harder to afford the properties they want.
You might assume it’s the same for foreigners – but it’s not as currency movements are also at play.
Melbourne property – although 25.9% more expensive for us, is actually 3.2% cheaper for Chinese buyers, 2.1% cheaper for UK buyers and 0.7% cheaper for Hong Kong buyers.
That’s the effect of the exchange rate today.
Our currency has been declining, which makes property in Australia cheaper for overseas buyers.
The effect of the currency exchange is documented in a new CoreLogic RP Data report and it’s pretty fascinating reading.
Check out the following tables to see how the Australian dollar is impacting local property values in your area for foreign buyers.
CoreLogic RP Data released another report recently, in partnership with Nine Rewards, that canvassed housing market sentiment among 1,010 Australians.
It asked people whether they felt foreign buyers were making it more difficult for Australians to own their own home
Unfortunately, the misperception here is very high with 73% of respondents agreeing and only 6% saying foreign buyers were having no effect on housing prices.
The truth is, both are partly right and both are partly wrong.
Here’s a few reasons why I feel there is a misperception here:
- Overseas-based investors are limited to purchasing new properties, so Australians are generally only going to compete with them in the new apartment sector.
- Foreign buyers tend to purchase higher priced properties so in many cases, they are not competing with Australian first home buyers.
- New migrants tend to congregate in certain suburbs where their families and friends have already settled.
For example, major Chinese communities in Sydney include Hurstville, Chatswood and Burwood.
Therefore, Australians are generally only going to compete with foreign buyers in these particular neighbourhoods.
- Wealthy new migrants tend to buy prestige property in blue ribbon suburbs close to the water.
This type of property is only affordable to a small pool of Australian buyers.
- One of the most common misperceptions in the market today is that every buyer of Asian appearance is a ‘foreign’ buyer.
Most of the time, they are actually Australians of Asian descent.
You don’t often see mainland Chinese investors standing around at auctions waiting to bid themselves, they are usually represented by a local buyers’ agent or they buy sight unseen over the phone, with a local family member or friend inspecting the property for them and acting on their behalf.
Australia’s multicultural society is one of our greatest assets and the long term economic and social value in offshore investment into our market is critical.
The depth of the Australian real estate market is vast, so foreign interest should we welcomed with open arms!