Despite a Covid-driven two-year hiatus, non-resident Asian investors are back in the Australian market buying residential property.

“Australia's safe haven halo is intact,” says Walton Chu, Founder & CEO of Teamlink, adding that this is underscored by the Russia/Ukraine conflict and increasing tensions between the US and China. 

“Rising interest rates make A$ deposits higher yielding and therefore more rewarding for overseas investors,” continues Chu, although he acknowledges that some overseas residents will be impacted by curbs on capital flows.   

“Once those deposits have been secured in A$, investing in residential property is a natural next step.”   

For non-residents, the primary focus is to make a profitable investment, rather than to buy in a trendy hotspot.  As the nation’s largest capitals, Sydney and Melbourne are still very appealing markets for Asian investors, and will be even more attractive now there is greater choice from increased listings, softening prices, and rising yields.  

While nationally house prices declined in May by -0.1%, rents continue to rise swiftly.  According to CoreLogic’s Home Value Index, the annual change in rents is now tracking at 8.8% across the combined capital cities and 10.8% across the combined regions.  

Unit rents are rising at a faster annual pace than house rents.  

“Early in the pandemic, there was a decline in tenant demand for units due to a preference for lower density accommodation,” says Chu.  That situation is now reversing.  “Demand for units is growing steadily due to the relative affordability advantage and, more recently, the boost from international arrivals returning to the rental market.”

China's Covid-zero policy and persistent lockdowns are stimulating immigration inquiries inbound into Australia which should also benefit off-the-plan sales by property developers in Sydney and Melbourne as they are the biggest employment markets.   

Locally, resident Asian investors retain strong cultural ties to their homeland and typically prefer units to houses due to safety and convenience benefits.  This preference is also supported by the record high affordability gap in favour of units over houses.   

Resident Asian investors are also very focused on positive cash flow, so the attraction of Sydney and Melbourne is that vacancy rates are ultra-low and rising rents act as a buffer to interest rate increases.