Last Friday we learnt that the divide between Australia’s housing haves and have nots looks set to widen even further in the years ahead.
A combination of record-low interest rates, a lack of housing reform, low household income growth and the increased propensity for younger Australians to save in the post-GFC period would further push housing affordability further out of reach, according to analysis conducted by ANZ.
However, perhaps there is another factor contributing to stretched housing valuations – foreign investment in Australia’s residential housing market.
The chart below, supplied by ANZ in its latest quarterly property council survey, shows what’s going on:
As you can see, 22.4% of all residential property sales recorded in the past quarter were to foreign buyers, unchanged from the previous quarter. Victoria had the highest proportion of sales to foreigners – 30.5% – while those in NSW numbered 26.3%, the second-highest level of all states and territories.
The full table of sales to international investors, not only for residential but also other property sub-sectors, can be found below.
Unsurprisingly, as the chart also reveals, these states also recorded the largest annualised increase in residential property prices – over 15% and 8% respectively.
While other factors are contributing to the gains in residential property prices, with foreigners mopping up over 25% of all available stock in NSW and Victoria during the quarter, it’s clear that sales to this component are also contributing to the steep increase in house prices.