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New figures point to an exodus of foreign investors from the Australian property market as a cause of the current tightening of finance for investment properties, as well as the downturn in values.
According to the Housing Industry Association’s chief economist Tim Reardon, foreign investors leaving Australia’s property market have played a considerable role in the current housing downturn, as well as contributing to lenders tightening access to credit.
Speaking at the Association’s March Industry Outlook Breakfast in Sydney, Mr Reardon said data from HIA Economics and the RBA indicate lending to investors is likely to drop down to its lowest level ever recorded.
Over the last two years, Mr Reardon said data from the Foreign Investment Review Board (FIRB) saw foreign investment decline from $30 billion to just $12 billion, with the vast majority of that sourced from China.
“What we know is state government certainly acted to restrict foreign investors in the market,” he said.
“Punitive rates of stamp duty have certainly had an impact, differential exchange rates may have had an impact, falling house prices in Sydney and Melbourne may have had an impact.
“But if we look at the rest of the world, Toronto’s seen the same thing, London’s seen the same thing, in fact they’ve seen bigger reductions in foreign investor activity in residential homes than we’ve seen.”
Mr Reardon said the reason why most Chinese investors have left the market is due to a tightening of Chinese restrictions placed on the flow of funds out of the country.
This has significantly impacted the Sydney market in particular, he claimed, causing a sharp downturn at the end of 2018, which Mr Reardon labelled as “largely unprecedented” and something that has not occurred in the last decade.
“If those market conditions continue, then the correction we’re expecting in the market, the correction we thought would take two years, will have been achieved in three months,” Mr Reardon concluded.