US buyers lead a 15.5 per cent surge in foreign investment in Aussie houses

It seems not even a global pandemic will dampen foreign buyer interest in Australian real estate. The latest Foreign Investment Review Board annual report shows a surge in foreign buyer investment of 15.5 per cent, taking it to the highest level in three years.

The United States leads international buyer demand for property with $13 billion worth of investment, trailed by Singapore with $9.5 billion and mainland China in third place with $7.1 billion. However, China’s overall value rose to just shy of Singapore’s when combined with that of Hong Kong.

European interest in Australian real estate also rose, with Germany accounting for $3.68 billion in investment and France $2.4 billion. Canada was the fifth most popular source country for investment with $3.3 billion.

The $17.1 billion worth of foreign residential real estate investment in the 12 months to June last year was up from $14.8 billion a year earlier but remains almost half of what it was at the peak of foreign investment in the 2016-17 financial year at $30 billion.

Executive chairman of Asia-wide real estate tech company Juwai IQI, Georg Chmiel, said Australia did relatively well last financial year amid the global gloom inflicted from COVID-19.

“When it comes to cross-border real estate buyers, Australia is now more attractive than ever. Only the closed borders and the inability of foreign students to attend Australia in person is holding back foreign residential investment.”

The report outlines how the jump in the value of foreign investment comes despite a six per cent 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.

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.

Victoria commands the majority of foreign investment in real estate, with 3000 of the 7056 approvals, followed by NSW with 1329 approvals and Queensland with 1311.

Commercial real estate saw a drop in foreign buyer investment, however, with $38.8 billion in investment, down from $73 billion a year earlier.

The number of foreign-owned houses left empty for more than 183 days of the year rose sharply to 231 from 118 in the 2018-19 financial year when the federal government introduced a vacancy fee on foreign-owned houses.

The number of property acquisition breaches was a fraction of what it has been in previous years, largely due to the impact of the pandemic and a subsequent pause in many compliance actions. 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.