What the increase in foreign investors means for you

By Greg Bell

Australian real estate has sparked foreign investor interest, especially when it comes to commercial property. But, what does this mean for local investors and how will the market be affected as international buying makes its way into the country? Let's take a look at this change in the market, including how real the increase in foreign investment is.

Foreign investor appetite

According to The Foreign Investment Review Board, there has been an overall increase in approved investments across all sectors in Australia. To be more specific, the number of real estate investments has increased from "$195.5 billion in 2019-20 to $233 billion in 2020-21, a 19% increase."

The same was not true across the board, as residential real estate saw a sharp downturn in foreign interest. The Foreign Investment Review Board has reported that investments have dropped by $6.7 billion. An outside appeal has specifically dropped by 37% this year as compared to 2021. However, it is important to note as you consider investing that Victoria still ranks first when it comes to residential real estate in foreign investments. Keep in mind that the Northern Territory has the lowest foreign investor interest, at only 1%.

The impact

Even though foreign investment interest is variable and dependent on the property type, local portfolio builders could be nervous about what the outside draw means for them.

For example, in 2021 there was mass confusion about what was causing residential housing prices to increase. According to a survey by the University of Technology Sydney, "more than 80% of Australians mistakenly believe Chinese investors are driving up house prices." This was not true and the actual culprit was domestic Australian buyers and record low-interest rates.

However, it does not mean that increased interest by foreigners does not have an impact at all. Daniel Ho, The Property Tribune contributor, said that the market has changed to support this kind of activity. According to Ho, "foreign buyers now only need a single approval, no matter how many properties they have to look at before they buy one. Under the old system, buyers needed approval each time they hoped to buy a property."

While this shift has made it more simple for international real estate investors to get their hands on Australian property, local buyers can reap the benefits as well. Foreign investment activity is extremely important to the country's economy. As the Australian government's Department of Foreign Affairs and Trade puts it, "to make the most of these advantages, Australia uses international capital to supplement domestic savings."

Global investors are a necessary piece of the puzzle, for local investors to realise their portfolio's full potential. The capital provided by foreign investors helps Australian property, both residential and commercial, to remain competitive and profitable.

To learn more about your options as a real estate investor, reach out to Ray White Surfer's Paradise.

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