New data shows that in the 2015 financial year, the Foreign Investment Review Board (FIRB) approved a whopping $61 billion foreign investment in residential housing stock. That’s the equivalent of 61,000 foreign nationals seeking to purchase Australian property – with the average buyer having at least $1 million to spend.
About 80% of approvals took place in Melbourne and Sydney and, though the foreign buyers ranged in age - from university students to retired couples - all had one thing in common: they desired a slice of property in Australia.
$61 billion. Let that sink in. That’s the equivalent of 61,000 foreigners coming into our marketplace holding a bag of a million dollars ready to snap up local homes and off plan real estate, while that may seem like a good thing for the economy, the down side is it also means these cash-rich foreign investors are competing with local Mums and Dads, most of whom definitely don’t have $1 million - and just want to find a home they can afford.
Roughly $10 billion of the $61 billion was approved to be spent purchasing established homes in leafy school belt suburbs, largely as an investment. Though Performance Property Advisory helps local high-income investors spot good quality markets that show value, I understand the frustration of every day locals, especially those in Melbourne and Sydney, who have to complete with people who haven’t grown up here, don’t live here and are not Australian citizens.
The rules are that foreigners can only buy new properties and off-the-plan properties because it stimulates growth and leads to jobs – and we support this but, there’s something very wrong when temporary visa holders many being foreign kids on student visas being allowed to snap up established properties valued at between $500,000 and $20 million because it takes away from the quality housing stock for Australians who have grown up here.
It is impossible to tell whether or not there has been additional foreign investment into established property illegally, but what we do know is that $61 billion worth of foreign housing sales was approved by FIRB in the 2015 financial year - and, not only is that number unprecedented, it’s more than triple the foreign investments in domestic housing in the three years prior.
I predict that, despite very expensive housing prices, Melburnians can expect prices to rise by at least 10% over the next 12 months but this trend will be isolated and should only be seen in homes located close to schools.
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