Chinese withdrawal limits post-pandemic foreign investment rebound

Several factors have driven this shift, most notably the COVID pandemic and the withdrawal of Chinese investors, which has fallen from accounting for 55 per cent of development site purchases between 2015 and 2019 to not registering a single purchase for 2022, with this trend likely to continue for some time, according to the FIRB.

Despite this, the group reported an increase in offshore buyers returning to the Australian property market from a number of other nations. Information from Real Capital Analytics indicates this pick-up in foreign investment in residential sites over the past 12 months, which has hit $1.3 billion, is akin to the levels seen prior to the pandemic’s onset in early 2020.

While these are positives after a multi-year lull, investment levels are yet to match the high of $2 billion hit in 2016, part of a spell of particularly high levels of offshore purchasing between 2015 and 2019. 

That four-year period was driven by Chinese investors; however, their absence in 2022 does not mean these levels are less likely to be reached, according to Ray White’s chief economist Nerida Conisbee, who outlined how a steady flow of investment — upwards of $400 million — has since come from Singaporean nationals. 

Additionally, purchasers from Japan, who have clocked above $800 million in transactions, are at their highest-ever recorded level. 

These trends bode well for affordability — which has risen in its prominence over the past few years, culminating in the national median house price reported by the Australian Bureau of Statistics (ABS) as being $941,900 for the March quarter.

In Sydney and the ACT, this median figure rests firmly above $1 million.

According to Ray White, the reason why offshore investment is good for affordability is the fact foreign purchasers are restricted to buying new homes, with a majority of these subsequently rented out. 

This, in turn, is expected to increase available rental supply to assist the supply shortages of properties available for lease in an environment where vacancy rates have fallen to record lows nationwide.