Even foreign buyers are beginning to feel squeezed by Sydney’s property market, as Queensland becomes a ‘top destination’

Foreign nationals are looking to Queensland to get into the property market. (Matthew Williams-Ellis, Universal Images Group via Getty Images)
  • Foreign nationals bought up more than $55.8 billion worth of Australian property during the last financial year, down 33% as the pandemic shut the country’s borders.
  • The Foreign Investment Board’s annual report shows property approvals were down again, having almost halved in the space of just four years.
  • The report shows Chinese investment was up 16% over the same period, while Queensland is quickly becoming a “top destination” for foreign investment.
  • Visit Business Insider Australia’s homepage for more stories.

The global pandemic may have slowed the free movement of people across borders but investment continues to skirt international restrictions.

The federal government has published the Foreign Investment Review Board’s (FIRB) annual report for the last financial year, tracking exactly how much money is flooding into the country and detailing where it is coming from.

Despite the difficulties in actually being able to visit, inspect and live in Australian properties during the pandemic, foreign nationals were approved to snap up more than $55.8 billion worth of residential and commercial property.

The figure is down 33% from the previous year. Other investment classes declined by just 15% for comparison as migration and international travel effectively stopped altogether.

Queensland is quickly becoming the a choice destination for foreign buyers

When it comes to where foreign investors are buying, Victoria is by far and away their first choice, making up 44% of all approvals.

New South Wales and Queensland meanwhile were tied in second, with 19% of the market each. For the Sunshine State, it marks rapid growth as overseas buyers increasingly look north, according to Asian real estate platform Juwai IQI.

“This is a tremendous showing by Queensland, which is rapidly becoming a top destination for foreign investment. Queensland used to be a distant second, but now it’s tied for second,” founder and chair Georg Chmiel said.

“Queensland has the advantage of lifestyle, less congestion and lower prices. New South Wales struggles with high home prices and even foreign buyers are sensitive to the high levels of unaffordability in many suburbs.”

Chinese nationals bought up big during the pandemic

While foreign buying activity decreased overall, some segments of the market are still growing strongly.

Chinese nationals bought up more than $7.1 billion worth of residential and commercial property, up 16% from the previous year. Include Hong Kong and that figures jumps to $9.5 billion.

Real estate continues to be the single biggest direct investment Chinese nationals make in Australia, representing around 55 cents of every dollar invested.

However, contrary to public perceptions, China hardly makes up the largest property investor in the local market. Singapore investors marginally outspent Chinese nationals, while the United States bought up over $13 billion last financial year, representing almost one quarter of all property sales based on value.

German investors bought up almost $3.7 billion, or more than triple what they were approved for in 2018-19, while Thai buyers were approved for $1.36 billion, or two thirds more.

Otherwise there were some very stark declines.

“Buyers from Japan and South Korea did not make any significant real estate investments during the year. That’s a big change from the prior year and represented more than $4 billion of lost approved investment,” Chmiel said.

Meanwhile New Zealand investment fell by almost 100%, while inflows from Hong Kong and the UAE shrunk by 74% and 44% respectively.

Foreign buyers are actually leaving the market

Interestingly though, foreign applications to buy Australian property continue to decline year on year. In the 2016-17 financial year, there were 13,198 prospective buyers. In 2020, that decline to a little more than 7,000, down almost 500 from the year before.

The FIRB attributes the decline to tighter local restrictions as well as more strict capital controls abroad, preventing foreign nationals from moving their money to Australia. Throw in new fees and more taxes and the review board says it makes sense applications have decreased.

Nor does it reflect changes to visa policies under the Morrison government. Covering only the 12-month period to July 2020, a directive to Home Affairs in September prioritised foreign investors over skilled workers potentially creating new demand for property and other investments.

Of those 7,000 odd approvals given, just 1,101 were for existing dwellings — permitted only for some temporary residents to live while they remain in the country.

The vast majority, some 6,000, were approved for new developments as part of a policy designed to “encourage investment in the residential real estate sector” and “help build a new supply of houses”.

Many of those are finding their way into the rental market, with just 109 homes classified as unoccupied during the year.

However, as property prices in some parts of the country continue to climb beyond all-time highs, while supply shortages remain, the policy still may not be having the desired effect.