Foreign investment in Australian real estate surges by 75 per cent

According to new data from the Foreign Investment Review Board, interest from international investors in Australian real estate has soared by a massive 75 per cent over the last financial year.

The data showed that the value of foreign investment approvals for residential real estate in the country grew by 75 per cent, which was the equivalent of 36,841 applications from non-citizens to purchase residential homes.

This rise took the value of such applications to a record $61 billion, and it has been confirmed that the growth could account for around 25 per cent of new residential developments in the country.

The figures represent a 60 per cent increase on the year prior, with approval numbers to allow non-citizens who are not permanent residents to buy Australian real estate more than tripling since the 2012-13 financial year.

Almost 50 per cent of the foreign investment approved was aimed at constructing new developments in Australia, which is positive news for both housing supply as a whole and in turn Australia's entire real estate industry.

The vast majority of foreign investors were interested in key urban markets, such as the buzzing cities of Melbourne, Sydney, and Brisbane. Across Australia's major inner-city markets, including these three aforementioned hotspots, foreign investment worth $28.7 billion was shared between just 152 developer applications.

International purchasers also made up 20,551 of the approvals for individuals to purchase newly built properties with a total value of more than $14.4 billion. This figure is nearly double the numbers recorded the year prior. Such buyers were also given approvals to invest an additional $36.2 billion in 506 commercial properties spread across the country.

These high levels of interest from international buyers made the country 'quite dependent' on foreign cash to supports its property market, research economists from financial firm UBS found.

The UBS experts were reported by ABC as saying: "Looking ahead, absent China completely shutting its capital account, the outlook remains more of a moderate downturn, rather than a collapse, albeit the risks are to the downside after such a significant spike in recent years."

The vast majority of the international investors in Australian real estate were from China. These buyers accounted for around two-thirds of the total number of foreign buyers across all real estate sectors, including residential and commercial.

Investors from mainland China made up around 36 per cent of the total value of real estate investment, which was more than triple that of the second largest investor, the US.

A related report from KPMG and Sydney University agreed with these findings, saying that Chinese investment in Australia grew by nearly 60 per cent in 2015, with almost 50 per cent of that investment coming as a result of the commercial real estate market. Other attractive investment sectors for Chinese buyers looking to Australia was agribusiness and infrastructure projects, the report found.

Hans Hendrischke, the co-author of the KPMG and Sydney University report, told Radio National that the interest from Chinese investors in the Australian market looked set to continue. "It's largely a result of growth in commercial real estate," he said, adding that investors from China have been "pouring money" into Australian buildings including offices and hotels.

"That [commercial property investment] has taken over and essentially made up for the decline that we saw over the last two years in mining investment from China," Mr Hendrischke went on to say.

Meanwhile, the report's other co-author, Doug Ferguson, head of KPMG Australia's Asia and International Markets, told the Sydney Morning Herald: "Overall we are seeing a strong story of Chinese investment into Australia's broader economy which is in line with premium products, services, and lifestyle-oriented themes."

Both authors confirmed that all of the Chinese buyers questioned for the survey were looking to invest further into the Australian real estate market over the coming years.

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