Chinese investor appetite for Australian residential real estate has accelerated during 2023 as buyers rush to secure a slice of the market ahead of other foreign investors.
In the year so far, Chinese buyers have purchased a total of $3.4 billion worth of approved residential real estate purchases, up 40% from last year, according to the Foreign Investment Review Board’s latest report.
The data shows that 826 approvals, valued at $1.1 billion, were granted to Chinese buyers in the June quarter alone, while 606 approvals, valued at $700 million, were approved in the March quarter.
For comparison, the 2021-22 total for Chinese buyers was $2.4 billion in approvals.
Source: Foreign Investment Review Board
The data puts Chinese buyers far ahead of the rest of the pack when it comes to appetite from overseas investors.
Next in line in a distant second place is Hong Kong which has $600 million worth of property approvals.
Property buyers from Vietnam are in third place ($400 million), followed by Taiwan ($300 million) and India ($200 million) for 2022-23.
Foreign buyers from Singapore, Nepal, Indonesia, the United Kingdom and Malaysia make up the remainder of the top 10 list.
The Foreign Investment Review Board’s data follows news that rich Chinese property investors are eyeing up Australia, with over 700,000 expected to migrate overseas in the next 2 years, with Australia ranking number one as the top overseas destination for Chinese property hunters.
Chinese travel is still currently at low levels, with outbound travel still yet to rebound to pre-pandemic levels thanks to limited airline capacity and high travel costs.
But as international travel resumes Chinese interest in overseas property markets is expected to grow even further.
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A recent Juwai IQI report expects that a sustained exodus over the next few years will continue to drive Chinese property investments abroad with around 712,000 people from the country anticipated to migrate to the US, Canada, and Australia between now and 2025.
The country's hard COVID-19 lockdown rules and restrictions, combined with President Xi Jinping’s push for “common prosperity” means China’s wealthy have been flocking to more welcoming places such as Singapore or setting up a backup plan.
While foreign investors have largely underpinned the presales for many apartment towers built in the past decade, they were shut out of Australia’s property market over the height of the COVID pandemic as Australia’s physical border closure kept international arrivals at a bare minimum.
Now our borders have reopened, our federal government has pulled away the welcome mat for foreign investors by imposing additional rules and higher fees.
So it’s worth remembering that foreign buyers can only buy new or off-the-plan residential properties in Australia.
They cannot buy established residential properties so aren’t able to compete with Aussie home buyers or most investors.
At the moment there are very few large apartment buildings coming out of the ground because they are not financially viable amid soaring construction costs and construction completion uncertainty.
Developers must pre-sell a large percentage of their properties in proposed apartment towers in order to get property development finance.
So an injection of foreign investment will only help the construction industry get some more projects off the ground.
And that will lead to an uptick in dwelling supply, which could help ease our rental crisis and dampen soaring rent prices.
As China’s travel restrictions continue to ease and investor appetite continues to grow, I only see foreign demand for new and off-the-plan sectors to continue strengthening in future.