The Changing Australian Real Estate Market: The Rise of Foreign Investments and Short-Term Property Resales

Times Viewed: 23

As Australia’s housing market navigates the challenges of a pandemic rebound, significant changes are taking shape in the form of an increased influx of foreign investors, particularly from China, and a surge in short-term property resales.

As noted by Nick Lenaghan in an article for the Sydney Morning Herald, Chinese buyers dominate foreign investment in Australian residential real estate, with $1.6 billion in proposed purchases approved in the six months leading to the end of December last year. The appetite for Australian property among Chinese investors has increased following China’s decision to reopen its borders. “We have five times more Chinese buyers than before, and they want to buy quickly,” said Fiona Yang, executive partner at Plus Agency. The lifting of border restrictions has led to a sharp rise in buyer inquiries, with Juwai IQI co-founder Daniel Ho noting that “Chinese buyer inquiries for Australian real estate surged by 24 per cent compared to December.”

Meanwhile, Jim Malo reports in another article for the Sydney Morning Herald, short-term property resales, or “flips,” are also on the rise. The percentage of property resales happening within two years has risen to 8.3 per cent, up from 6.3 per cent a year earlier, according to CoreLogic data.

The increase in short-term resales is significant and indicates an attempt by property owners to get ahead of mortgage stress and sell before being forced to do so. “We could be seeing short-term resales off the back of higher interest costs. If people are finding they may not be able to service their mortgage off the back of rapid rate rises, they may be getting ahead of defaulting on their loan and it becoming a mortgagee in possession sale,” says Eliza Owen, CoreLogic’s head of Australian research.

Interestingly, the rise in short-term resales isn’t necessarily indicative of an imminent property crisis, but rather it shows a trend of early market adjustments, particularly among investors. Westpac senior economist Matthew Hassan suggested that these resellers were most likely to be investors. “They may well be reconsidering, and think, ‘It may be time to offload and meet my mortgage payments on my principal place of residence’,” he said.

The Australian property market is indeed experiencing significant changes driven by the resumption of international mobility and the adjustment of local property owners in response to financial pressures. While these trends continue to develop, their long-term effects on Australia’s real estate market remain to be seen.

References

Lenaghan, N. (2023). China tops the list of foreign house buyers in Australia. Sydney Morning Herald. https://www.afr.com/property/commercial/china-tops-the-list-of-foreign-buyers-of-housing-20230309-p5cqrn 

Malo, J. (2023). A boom-time property trend is back – this time to deal with mortgage stress. Sydney Morning Herald.