Foreign buyer interest in Aussie real estate surges during COVID-19 pandemic

Foreign buyer interest in Australian property has surged during the global pandemic, taking it to the highest level seen in 3 years, and it’s no longer China taking the title as the biggest investor.

There was $17.1 billion worth of foreign residential real estate investment in the 12 months to June last year, which was up 15.5% from $14.8 billion just a year earlier.

But the numbers still sit at around half of what it was at the peak boom of foreign investment in the 2016-17 financial year at $30 billion.

The United States leads the charge, with its investors accounting for a whopping $13 billion worth of property investment in 2019-20, according to the latest Foreign Investment Review Board (FIRW) annual report.

Singapore comes in second place with $9.5 billion of investment, followed by mainland China which accounts for $7.1 billion of investments, then Germany with $3.7 billion, and Canada, whose investors made up $3.3 billion of investment in Australian real estate.

Sure, Chinese investment is currently low, but it’s clear that investors from other nations are keen to take their place when it comes to investment in the Australian property market.

And the data is unsurprising given the way Australia has managed the COVID-19 pandemic over the past 18 months.

While many countries around the world have succumbed to the virus both from a medical and economic point of view, Australia’s quick-thinking actions to close borders and implement strict contact tracing and social distancing mean life has managed to all but return to normal.

With the exception of the occasional outbreak such as the one, we’re experiencing in NSW now of course.

Still, Australia’s success in squashing the outbreak means foreign buyers identify our property markets as a more stable investment.

What's more, I think the desire for foreign investment in Australia will only increase as we continue to handle the COVID-19 situation so much better than other countries.

Our property markets are more robust than ever, our economy is strengthening by the day and Australia is becoming an increasingly attractive option for all sorts of investors.

Only the closed borders and the inability of foreign students to attend Australia in person are holding back foreign residential investment.

Types of property in demand

The report also points out how the jump in the value of foreign investment comes despite a 6% drop in the number of approvals due to tightened credit restrictions in the buyers’ home countries, local state taxes, and foreign resident stamp duty increases, and foreign investment application fees.

When it comes to property type, the report shows that established housing was in stronger demand than a year earlier, with $4.5 billion worth of approvals, up from $1.7 billion.

But demand for new dwellings remained fairly static at $4.9 billion worth of investment, up from $4.8 billion.

Meanwhile, commercial real estate saw a drop in foreign buyer investment with only $38.8 billion in investment, a staggering fall from $73 billion the previous year.

And where are these investors looking?

According to the report, Victoria is home to the majority of foreign investment in real estate, with 3000 of the 7056 approvals.

This is followed by NSW with 1329 approvals, then Queensland with 1311.

Property acquisition breaches

Surprisingly, despite a surge in investment, the number of property acquisition breaches was significantly less than what we’ve seen in previous years.

Presumably, this is largely due to the impact of the pandemic and also because many compliance actions were paused during the height of lockdown last year.

There were 259 properties in breach of the foreign investment rules, of which 40 per cent were in Victoria.

The number of breaches was down from 600 in each of the previous two financial years.

There were 70 divestment orders issued, down from 83 in the 2018-19 financial year.

About Robert Chandra Robert Chandra is a Property Strategist at Metropole and has an intrinsic understanding of property markets backed by many years of real estate experience. This coupled with several degrees gives him a holistic perspective with which he can diagnose clients’ circumstances and goals and formulate strategies to bridge the gap.