Off-shore Investors – and What It Means For Australian Buyers

16 Oct Off-shore Investors – and What It Means For Australian Buyers

The media is full of reports about Chinese investors bumping up the prices in Australian suburbs. But what’s the reality?

According to predictions from leading financial services sector experts, residential investment from Chinese-based property investors and new immigrants from China will climb to more than $60 billion within 6 years – a figure that is more than double the current annual amount.

Chinese buyers are important drivers of local house prices – especially in some key suburbs of our major cities.

The reason is multi-faceted. While Australian home-buyers buy with the knowledge of local areas and the desire to profit by buying in an area with great re-sale potential, off-shore investors have different motivations.

When it comes to the Chinese market, the need to park wealth is a key influence – with many wealthy Chinese business people seeking any opportunity to park their riches, without any regard for hot spot suburbs. It is because of that, the bidding at auction is more likely to exceed vendor expectations, as the Chinese investors are not bound by adhering to actual value – and are just keen to purchase at any price. While some avenues of the media make it seem that Chinese property buyers are impacting on house prices all over Australia, the reality is that the off-shore investment is really only having a direct impact on some areas.

A 2014 parliamentary inquiry into foreign investment determined that overseas buyers actually helped increase housing supply, something that put a downward pressure on local property prices. Newly amended foreign investment rules — including the $5,000 application fee for property purchases under $1 million — will do very little to slow Chinese demand. But while it is easy to blame the rise in off-shore property investment with our soaring local house prices, the reality is that there are many other factors at play.

The lack of affordability has a lot to do with systemic problems with Australia’s housing supply and the effect of tax incentives on offer to local investors. The unprecedented low interest rates, combined with an appetite for investing that has been fuelled by favourable tax treatment for property investors, has had a direct impact on an increasingly tight supply and demand. Regardless of your opinion on what may be driving the prices in the local housing market, local buyers keen to buy well are always keen for credible information about suburbs of good value.

A recent report in Melbourne media revealed the top performing suburbs – places where property owners have been fortunate enough to benefit from solid and steady growth.

For units, the top performers over the past decade were:

• Altona North – 202%
• Murrumbeena – 173%
• Malvern – 148%
• West Footscray – 139%
• Ashburton – 136%
• Gardenvale – 135%
• Forest Hill – 133%
• Box Hill North – 128%
• Eaglemont – 126%
• Brooklyn – 125%

When it came to houses, the figures, according the Valuer General’s Annual Report, showed these suburbs were the winners:

• Balwyn – 169%
• Mont Albert North – 161%
• Middle Park – 159%
• Balwyn North – 149%
• Chadstone – 144%
• Travancore – 142%
• Kew – 141%
• Mont Albert – 140%
• Glen Waverley – 138%

For advice around financing your next property purchase, or re-financing your existing home loan, talk to us at [email protected] or 0488 814 148.