Foreign investment in Australia's housing market is increasing again

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The proportion of Australian homes sold to foreign investors last quarter increased for the first time since 2015, according to the latest residential property survey released by the National Australia Bank (NAB) on Tuesday.

Most of the buying was concentrated in the Victorian and New South Wales markets, the epicentres of Australia’s housing affordability concerns right now.

“Foreign buyers accounted for 10.9% of all new property purchases (10.2% in Q3) — the highest level since Q1 2016,” the NAB wrote. “In established housing markets, their share rose to 7.6% (6.4% in Q3) — the highest level since Q4 2015.”

Source: NAB

For new housing, the NAB said foreign buyers were noticeably more prevalent in Victoria, where their market share of sales rose to 19.3%, up from 15% in Q3/16.

Elsewhere, 9.3% of new properties sold in Western Australia went to foreign investors, marginally ahead of Queensland at 9.2%.

In NSW, the nation’s most expensive housing market, only 8.1% of new properties were sold to foreigners during the quarter, up fractionally on the previous quarter’s 8.0%, but well below the 20%-plus levels seen in early 2015.

Perhaps they too are being priced out of the market, although, for existing properties, the proportion actually increased on the previous quarter.

Source: NAB

Of all existing properties sold in NSW, 8.4% went to foreign investors, up from 7.2% in Q3. That performance was even more pronounced in Victoria where 10.8% of properties were scooped up by offshore buyers, a hefty increase on the 8.5% in the September quarter.

The NAB said that foreign buyers were also a little more active in Western Australia, rising to 5.4% of total sales versus 5.2% in Q3, but less prominent in Queensland where their market share fell to just 5.0%, the lowest proportion since mid-2012.

By type of property, around 55% of properties purchased were apartments, with the remainder split between houses (30%) and land redevelopment (15%).

“In Victoria, around 47% of sales were for apartments, compared to around 59% in new South Wales and Queensland and 52% in Western Australia,” the NAB said. “In contrast, around 33% of foreign purchases in Western Australia and 32% in Victoria consisted of houses, compared to 27% in New South Wales and 31% in Queensland.”

Nationally, the vast majority of apartments sold to foreigners were below $A1 million, arguably the same market targeted by domestic first-home buyers.

Source: NAB

“Around 30% of apartments purchased by foreigners were valued at less than $A500,000, and 45% were valued at $A500,000-$1 million,” said the NAB.

At the premium end of the market, around 16% were for apartments worth $A1-2 million, 7% for properties worth $A2-1 million and 3% for apartments over $A5 million.

It’s a safe bet that the vast majority of those high-end sales occurred in Sydney, based off recent data released by CoreLogic.

Source: NAB

For houses, the vast majority of sales to foreigners were valued at less than $A1 million.

“18% were for less than $A500,000 and 39% between $A500,000-$1 million,” the NAB said. “By state, 46% of houses in Victoria and 41% in New South Wales were sold below $A1 million compared to around 75% in Queensland and 76% in Western Australia.”

Again, a price point that suggests direct competition with domestic first-home buyers.

The increase in foreign buyer activity, accompanied by an increase in domestic investor activity over the same period, will no doubt fuel the debate over housing affordability in Australia, particularly when it’s concentrated in those areas where concerns are already the most acute, and at price levels where most prospective domestic buyers would be looking to enter the market.

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