In Australia, housing affordability has often been a big issue with the middle class and lower-income earners. This situation doesn’t seem it will get better any time soon. At the beginning of 2019, housing prices in Australia went up significantly. Potential home buyers were reluctant to take investment steps. However, the influx of Americans and Chinese property buyers into the Australian housing market is a concern for local stakeholders. With the ownership of over half a million Australian homes belonging to foreigners in Sydney and Melbourne, let’s analyze the direction of the country’s real estate market.
The US and China Are Leading Real Estate Investors in Australia
Demand is the main factor that’s snapping up the price of property for sale in Australia. Usually, foreigners that are looking for second homes often consider the Aussie real estate industry as their top priority. According to the Government’s Foreign Investment Review Board (FIRB), Chinese investors rank lower than other prospective homeowners from the US. Also, new data shows that between 2016 and 2017, the Chinese invested $38.9 billion in Australia’s property market. However, this value declined to $23.7 billion between 2017 to 2018.
While property buyers from the US showed a reverse trend from their Chinese counterparts, they spent $26.5 billion between 2016 to 2017. Additionally, the US investment in Australia’s real estate rose to $36.5 billion between 2017 to 2018.
What Is Attracting Foreign Buyers To Australia’s Real Estate Market?
The median house value of properties in Sydney and Melbourne recorded a new low in 2018. While the average value of homes declined by 11.1% between 2017 and 2018, this period might be the right time to take advantage of Australia’s property market. Generally, the period of downtrends in real estate often leads to easier purchase decisions. International investors continue to show interest in their favorite Australian cities. As an offshore investment destination, foreigners are entering Australia’s real estate market to take advantage of the low unemployment rate and, strong economic potentials.
Other real estate analysts believe that Australia’s lifestyle will continue to attract foreign investors. However, policymakers are tightening lending restrictions and imposing higher foreign ownership taxes to check the influx. Perhaps, the challenge of Sydney’s rising population will create more infrastructures for these American and Chinese property investors.
Will The Dwindling Dwelling Values Deter Foreign Investors?
Last year, the policy of taxes and tighter lending restrictions reduced the interests of Chinese buyers in Melbourne properties by 18%. Since lending as a motivation for buying properties has declined, international house hunters will devise other options after migrating to Australia. By the end of 2019’s first quarter; the property market fundamentals indicate that Sydney’s housing market fell by -3.2% and foreign interest grew. Since its peak in mid-2017, Sydney’s oversupply of new apartments has triggered a drop in the prices of expensive properties.
On the contrary, Canberra’s housing market grew its dwelling values during the first quarter of 2019 by 3.1 %. The city’s median value for houses is AU$ 595,212. In the medium term, analysts expect Canberra’s property market to grow stronger than other regions.
According to data from the Australian Bureau of Statistics, housing finance commitments have gone down from what they were a year earlier. Foreign investors still find decent properties attractive regardless of the country’s tight lending policies. They will enter the market to take advantage of decent neighborhoods, and proximity to public utilities.
While this decade brings an interesting period to Australia’s property market where property sales happen easily with no agent present, the factors of supply and demand will continue to affect investment decisions. Also, factors like migration, employment opportunities, and population growth will determine consumer confidence in the housing market.
