- Whether by total approvals or number, foreign investment in Australia’s housing market is slowing.
- While capital controls in China have been a major factor behind the slowdown, the introduction of fees, charges and restrictions on offshore buyers are also at play.
- Juwai.com, a leading Chinese property website, says there’s likely to be any further restrictions announced this year, except possibly in Tasmania.
The value of approvals for foreign investment in Australia’s housing market tumbled last financial year.
According to Australia’s Foreign Investment Review Board (FIRB), a total of 13,198 residential real estate applications were approved in the 2016/17 financial year, totalling $25.2 billion. That was well down on the 40,149 approvals, totalling $72.4 billion, granted in the 2015/16 financial year.
It’s worth pointing out that these were approvals, not actual foreign investment, over the year.
While the steep drop in approvals was largely due to the introduction of an application fee in late 2015, creating an incentive for offshore investors to only to apply for properties they intended to purchase, not possibly buy, few will disagree the level of foreign activity in Australia’s housing market is now far lower than what it once was.
Although tighter capital controls in China has been a major factor behind the slowdown, limiting the ability for Chinese citizens to get their money out of the country, another reason demand has slowed is that buying fees and restrictions in Australia have also steadily increased, especially in those markets popular with offshore investors.
As seen in the simple-yet-effective chart below from Juwai.com, a leading Chinese international property website, various state governments have increased fees and charges for offshore investors.
On top of those fees and charges, national restrictions on the purchase of established dwellings without approval, as well limiting sales to foreigners in new developments to no greater than 50%, have also been put in place.
At the margin, these have likely contributed to the slowdown in foreign buyer activity.
With many Australian property markets starting to cool, removing an area of angst about the involvement of offshore buyers pushing up prices, Juwai believes that with the exception of Tasmania, there’s unlikely to be any further restrictions placed on offshore buyers in the year ahead.
“It is possible that Tasmania may still impose a foreign buyer tax as a way of demonstrating action on housing without having to grapple with the actual, difficult causes of the housing shortage it currently faces,” the group says.
It says that unlike what’s been seen in New South Wales and Victoria in recent years, the boom in Hobart home prices — currently running at an annual pace of 12.7%, according to CoreLogic — has been driven by high interstate migration, rather than offshore buyers.