As the world continues to shrink (metaphorically, don’t panic), international real estate investment is becoming more popular than ever before. Improved communications, reduced transactional friction, and investment-friendly policies are drawing Asian investment to the U.S. market in record numbers. There’s also been intense activity in Australian real estate, particularly from Asian investors.
iProperty.com conducted a survey at the end of the year which showed that Australia was the first choice of investment location for international property buyers based in Singapore and Malaysia, second for Indonesian investors.
Experts suggest that these investors see Australian properties as a better investment than real estate in other countries. It is often relatively cheap, given currency fluctuations. The Australian dollar has fallen by about 30% in the last few years.
Asian investors are “looking at larger towns like Newcastle and Wollongong. Larger established towns (with) universities in place and also potential for growth from a commercial side of things,” according to a profile posted last summer.
There’s been a high level of investment from China as well. The Wall Street Journal recently reported that Chinese investment in Australian real estate has doubled in the past year. This segment accounts for 16% of the total sales of Australian real estate. In fact, China invests 3 times the amount in Australian real estate that the U.S. does, and 6 times what Singapore invests. Prior to 2013, the U.S. was the leading investor in Australian property. China is extremely important to the Australian economy. It is Australia’s largest export destination and also contributes to that country’s growing international tourism.
This is partly fueled by uncertainty surrounding the Chinese economy. Favorable trade agreements and a growing Chinese middle class also encourage the flow of investment to the Australian market. High net worth individuals in China find the Australian market attractive, both in terms of price and economic stability.
Actions by the Australian government at the end of 2015 put a bit of a damper on foreign real estate investors. The government cracked down on property owners who had not gotten the required approval for their investments. It also instated a new fee for international investors registering their Australian properties. Rules governing newly built properties are less restrictive, and this has led to record participation from foreign investors in development projects.
The international impact is being felt most in the residential market, in part due to the small size of the commercial market, which is dominated by domestic investors. Still, foreign money is going into commercial properties as well as development plans. Overall, in the past year, 50% of Australian real estate investment capital came from foreign investors, according to Australia’s Foreign Investment Review Board.
Observers predict that this high level of foreign interest will have an impact on all sectors of the Australian market. Demand is expected to grow in hotels and resorts and even in the rural land market. It’s likely that this trend in high demand will continue into 2016.