Foreign investment slipped during the pandemic

Usually, foreign investments are only screened if they fall above certain monetary thresholds.

However, in March 2020, the Morrison government introduced a zero dollar threshold, citing concerns about the pressure facing Australian businesses during the pandemic.

At the time, the government said, “These measures are necessary to safeguard the national interest as the coronavirus outbreak puts intense pressure on the Australian economy and Australian businesses.”

As a result of these changes, both the volume and value of foreign investment applications in Australia has stagnated.

The Foreign Investment Review Board’s latest report covers the 2019-2020 financial year, so the full impact of the changes is not yet clear.

The board, however, noted that of the 8,221 applications approved in the reviewed period, 8,084 were non-zero dollar threshold proposals representing a total value of $192.8 billion.

“This is a 7.3 per cent decrease in the number of non-zero dollar threshold applications approved and a 16.5 per cent decrease by value compared to 2018-19.”

Approvals for residential property investments suffered a big hit, reducing by 455 to 7,056. Their overall volume, however, increased by $2.3 billion on the year to a total $17.1 billion.

Victoria approved the most residential real estate applications at 43 per cent, while NSW and Queensland tied in second place with 19 per cent.

As for the commercial real estate market, $38.8 billion across 440 foreign investments was approved by regulators in 2019-2020.

This represents a significant decline on the previous financial year, where $73 billion was invested across 487 approvals.

Despite these declines, Juwai IQI Group’s co-founder and executive chairman, Georg Chmiel, believes that amid the global gloom, Australia did relatively well.

“Investment into Australia declined by only slightly more than total global cross-border investment.

“When it comes to cross-border real estate buyers, Australia is now more attractive than ever. Only the closed borders and the inability of foreign students to attend calls in Australia in person is holding foreign residential investment back today.”

Mr Chmiel noted that mainland Chinese investment in Australian real estate surged by 16 per cent from $6.1 billion to $7.1 billion.

“Including Hong Kong, Chinese investment totalled $9.5 billion. Those numbers include both residential and commercial real estate.”