Reasons why Australian Property is Great for Overseas Investors

Reasons why Australian Property is Great for Overseas Investors

For years, Australia has been a hot destination for overseas investors and people from across the world want to get a slice of the Australian real-estate pie. As per the Reserve Bank of Australia, foreign investment in various residential properties has increased from $6 billion/year in the 1990s to over $17 billion in 2012-13. By most current estimates, the value of the foreign approvals for residential property purchases exceeded 12% of the total dwelling turnover.

The Current Investment Landscape

It has to be understood that overseas real estate investment need not always come from foreign buyers alone. The estimation is that, there are almost 1 million Australians scattered across Europe, North America as well as South East Asia. Regardless of whether these expats are planning to stay there for good or return someday, they too may have an interest in investing in Australia. Let’s take a look at why overseas investors are attracted to buying property in Australia:

#1 Stability

  • The property market in Australia has a proven record of being stable
  • About 70% of Australian households are homeowners
  • There is considerably less speculation
  • There has been paucity in housing supply in most of the capital cities
  • Australia has a very responsible lending legislation as well as prudent economic management; this reduces the risk of any asset-price bubbles
  • The country has never seen a price drop of more than 20% in any year
  • Property markets in countries such as the U.S or Hong Kong have suffered very significant real estate crashes that are an alien concept in Australia
  • Overseas investors have a much smaller impact in the country as a major portion of the housing market in Australia is owner-occupied
  • The APRA- Australian Prudential Regulation Authority manages all banks’ lending activities; this reduces the risk of any unsound lending practices that cause an unsustainable increase in prices
  • The Australian government is making a total projected infrastructure investment of $125B in 2013-14 & 2019-20 across every state & territory

#2 Consistent Growth Performance

  • Over the last 100 years, properties in Australia have enjoyed very consistent capital growth; almost every 7-10 years there has been a doubling in property prices
  • One of the primary reasons behind this growth is the chronic housing shortage in a number of major cities across the country. The population-growth is faster than the rate at which homes are being constructed
  • Property prices have increased in line with the ability of the market to pay for housing
  • Australia has the world’s 3rd most-transparent real estate industry

Recently, the 2015 Intergenerational Report revealed that by the year 2054-55, the population in the country is expected to touch almost 40 million which is almost a rise of 17M from current day figures. This also means more people will need homes and investors know their properties will appreciate at a much faster pace.

#3 Ease of Investment

A number of countries have extremely restrictive banking regulations and foreign investment laws, which makes it difficult for overseas investors to sink money into real estate. But things are very different in Australia:

  • The government approval process for foreign investors is inexpensive and uncomplicated
  • Specialist mortgage brokers can help you obtain finance
  • The consumer protection legislation in Australia is very strong
  • The legal system in Australia is based on the system used in the UK and many investors find it easy to understand
  • Minimal social, political or other instability in the country

Other reasons why people want to invest in Australia

Recently some government proposals that have been put forth may mean that foreign investors will have to pay the FIRB higher application fees (depending on the value of the property they want to invest in). But this may not be much of a deterrent to serious overseas investors because Australia has diverse international cities and stunning natural beauty. Commercial properties such as retail outlets, offices, hotels etc have proved to bring in excellent returns and this attracts the larger foreign investors. All-in-all, there are a number of things that make Australia the preferred choice when it comes to overseas investment in real estate.

Thanks for reading,
David Miniter
0414 998 727

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