The 11% fall occurred before the COVID-19 pandemic hit.
The FIRB’s figures reflect a trend towards buying brand new properties over existing ones, along with a growing interest in more expensive properties:
New figures obtained from the Foreign Investment Review Board by The Australian show a fall-off in purchasing by foreigners of 11 per cent between the 2018 and 2019 fiscal years to 9295 sales valued at $7.5bn.
A drying up of project launches in the wake of the pandemic is likely to drive down building numbers further, with border closures stripping away demand…
The report confirmed a trend towards brand new over established property alongside an increasing interest in higher end purchases, with the median price of purchases over $1m up 1.6 per cent to account for one in five sales in the 2019 financial year…
“The bad news is that transactions have dropped precipitously due to travel bans and other practical difficulties,” [Executive chairman of Chinese property portal Juwai IQI Georg Chmiel said].
“Transactions do happen. But the only foreign buyers making purchases are in Australia or are willing to buy sight unseen.”
Strangely, during the recent shutdowns, the NAB Property Survey reported increased foreign buyer activity though it was very narrow, focussed on VIC which was shut!
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While the prominent role played by foreigners in Australian housing markets has dissipated in recent years, market share in this buyer group in Q2 increased in both new and established housing markets. In new property markets, their overall market share increased to a 2-year high 8.3% (6.6% in Q1) and to 3.1% in established housing markets (from a survey low 2.4% in Q1). But buying activity is still below survey average levels in both markets.
In new property markets, the share of sales to foreign buyers jumped noticeably in VIC to an above average 19.3% (12.4%) and has continued the rising trend seen in the past 3 surveys. Market share of foreign buyers in new property markets fell in all other states. It fell to 2.5% in NSW (4.6% in Q1; average 9.1%), 6.4% in QLD (9.7% in Q1; average 12.0%) and 1.7% in WA (4.0% in Q1; average 6.3%).
In established housing markets, foreign buyers accounted for a larger share of sales in VIC (4.8% vs. 2.3% in Q1), NSW (3.4% vs. 2.8% in Q1) and QLD (2.3% vs. 1.6% in Q1), but a smaller share in WA (2.2% vs. 3.8% in Q1). The share of foreign buyers however remains below survey average levels in all states.
Perhaps it was a bit of Hong Kong spillover.
Anyway, with borders likely to remain closed for the foreseeable future, and Australia and China locked in a cold war, it’s hard to see foreign demand rebounding to former levels anytime soon.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
