‘Millionaire’ foreign buyers flock to new state

Foreign cash flowing into Australian homes has surged by an additional $400 million, according to new figures, solidifying Queensland as the new hot spot for overseas investors.

Data from the Foreign Investment Review Board (FIRB) for the October to December 2023 quarter shows 1,580 residential real estate investment proposals worth $1.9 billion were approved.

The majority of this investment, $800 million, came from China, with an additional $100 million from Hong Kong.

India, Vietnam, and Taiwan each contributed $100 million in home purchases.

This total is up from $1.5 billion in the previous quarter, of which $700 million was from China.

For the full 2022-23 financial year, Chinese investors purchased 2,601 homes worth $3.4 billion, up from 2,317 homes worth $2.4 billion in 2021-22.

Increase in foreign purchases

A report by the Australian Taxation Office (ATO) analyzed foreign purchases of residential real estate for the 2022-23 financial year, revealing a 26.8% increase in transactions across Australia.

Foreign buyers purchased 5,360 homes worth $4.9 billion, up from 4,228 purchases totaling $3.9 billion in 2021-22, and 5,310 purchases totaling $4.2 billion in 2020-21.

A greater proportion of purchases in 2022-23 were for established dwellings at 34%, compared with 49.3% for new dwellings and 16.7% for vacant land.

New dwellings represented 52.1% of transactions in the previous year, with 31.7% for established dwellings and 16.2% for vacant land. Foreigners also offloaded 1,119 properties worth $1 billion in 2022-23.

Attraction to Australia and the impact of foreign investment

Foreign buyers are drawn to Australia for its strong economy, good education system, and attractive lifestyle.

However, they face significant costs, including stamp duty and foreign buyer application fees.

For instance, foreigners pay $14,100 for new dwellings and $42,300 for established dwellings valued at up to $1 million.

Higher-priced dwellings attract higher fees, and foreign owners who leave properties vacant must pay an annual vacancy tax.

However, there is growing concern among Australians about the impact of foreign investment on housing affordability.

A recent survey found that 83% of respondents support restricting Chinese investment in residential real estate.

This sentiment is echoed by the University of Technology Sydney’s Australia-China Relations Institute (ACRI), which reported that 80% of respondents believe foreign buyers from China drive up housing prices.

Despite these concerns, ACRI director Professor James Laurenceson argued in an article from news.com.au that  that the facts are more nuanced.

Foreign investment in new housing increases domestic supply, improves affordability, creates construction jobs, and boosts government revenues.

However, foreigners without Australian citizenship or permanent residency can only purchase new homes unless approved by the Treasury, and they must pay hefty fees.

About Sam Alaaeddin With well over a decade's experience in asset and wealth management, Sam is an Elite Wealth Planner at Metropole and leverages his expertise to help clients achieve their wealth management goals. He holds a bachelor’s degree in law and commerce (Finance) and a Diploma in Financial Planning.