Chinese buyers retain lead for foreign residential purchases

Over the September quarter 2023 and the first quarter of the current financial year, there are 1,374 residential real estate investment proposals approved by the government.

Worth $1.5 billion in total, the report stated that China is the largest source for approved residential real estate by both number and value – of $700 million.

This is followed by investors from Hong Kong, Vietnam, India and Taiwan, who have all contributed approximately $100 million in value apiece.

Weighing in on the data, Juwai IQI co-founder and group managing director Daniel Ho acknowledged that while China is still the number one investor, they are seeing fewer offshore Chinese and Hong Kong buyers making purchases.

“Instead of buying as non-residents, most are waiting until they have permanent residency in Australia,” he flagged.

“If you know you’re on the path to getting permanent residency, there is no reason to pay the extra costs that come with purchasing as a non-resident. That means the extra stamp duties and the uncertainty of the FIRB process.”

He also raised that owning property as a foreign buyer, with the associated land tax and vacancy tax, “is more expensive than owning it after you have permanent residency”.

His comments come days after the federal government officially introduced legislation to increase foreign investor fees, citing the freeing up of housing stock for residents.

“A host of factors is dissuading Chinese buyers who are non-residents and encouraging them to buy once they have their residency in order,” Mr Ho considered, pointing out that the report “only tracks purchasing by those who do not have residency”.

Peter Li, the general manager of Plus Agency, also acknowledged that many Chinese buyers won’t show up in the report because they have “migrated already”.

He noted that for these kinds of buyers, it’s usually the case that “the property they buy with FIRB approval is just a transition property for them to live in temporarily”.

“Once they get their residency, they will start to look for a big house in the suburbs for $10 or $20 million.”

He also shared that many of the people who have required FIRB approval in the past few years “are now permanent residents”.

Looking ahead, and with the rise in fees, Mr Li expects fewer foreign investment transactions, pointing out that “anyone who isn’t highly motivated can be deterred by the fees”.

Mr Ho’s expectation is that “Chinese and other Asian buyers will purchase more property in Melbourne this year than in 2023”.

And overall, he said “purchasing will be driven by relatively strong economies and Australia’s attractiveness for investment and lifestyle”.

Mr Li’s forecast is not so fair-weathered, noting “Chinese interest will decline in by 2025 because the Chinese economy is weaker today so they have less money”.

Stating that the demand for property has dropped in general because of rising interest rates, he also pointed out that the canning of the “golden visa, which enabled some super rich people to easily come to Australia” will stall activity.

“On the other hand, we see increasing demand from south-east Asia,” Mr Li countered.

“Overall foreign buyer demand will remain similar, but the source countries will change.”