Andrew Bell’s Market Update: Foreign Investors – What Is The Fear?

MARKET WRAP
Issue 21   |   October 13th, 2016  |  Foreign Investors – What is The Fear? 

LIVE from 39 Southern Cross Drive, Cronin Island

Cronin Island is a somewhat unknown gem here in the heart of the city of the Gold Coast and is home to 34 very lucky owners of quite prestigious properties not only by their stature but by their location alone.

Foreign Investors – Do They Matter? 

The most recent FIRB annual report shows that China at $27.7 billion has over taken the US, at $17.5 billion, Canada at $15.4 billion and Malaysia at $7.2 billion, making it the largest investor on an annual basis. Foreign investment has been a highly motive topic recently, with the constant claim that foreign investment is forcing Australian families out of being able to buy homes within Australia. What may be of a surprise to all is that nearly half of the Chinese investment was concentrated in Commercial Real Estate transactions.

What we see in the last reporting year, is the number of foreign buyers of new Australian homes tripled with total spend on off the plan apartments growing from $5.73 billion to $16.4 billion.

Let’s acknowledge how emotive it is when it comes to the negotiation process of trying to buy a home. It doesn’t matter who out bid you at an auction, or who potentially paid a higher price than you, it is immensely disappointing when you miss out on a property you desired. Should it be a foreign investor, there is a natural inclination to say ‘let’s ban those buyers’. One observations is that a very high proportion of the foreign buyers, whether they are Chinese, or any other nationality, are indeed Australian citizens. As Australian citizens, they have every right to buy property. We have to be careful and mindful not to label every person from a foreign culture as a foreign investor, as it distorts our perception.

However, the Government has responded. Foreign investment regulations are heavily policed, and as a result we would of read many people are now having to sell properties in which they purchased outside the regulations. It has received such publicity overseas, that it has driven a lot of foreign investors to other countries. Banks have now responded to APRA intervention and all but ceased funding to foreign investors. The result of this change has produced a significant drop in foreign investment in Australia.

What Is The Fear?

Moving forward, it is going to be interesting to see what happens off the back of this significant fall. The Gold Coast, in particular, was receiving enormous benefits. We have attracted some amazing Chinese developers taking on wonderful projects that Australian developers simply would not invest in, could not invest in, simply due to the limit in funding. These developments will add to our pool of available properties for Australian citizens, as well as others to purchase. Without this investment, the city could not grow and therefore limit our housing stock. By regulating foreign purchases out of the market, It is suspected and has already begun, that foreign developers deciding not to proceed in developing here in Australia. These big projects will never get off the ground without a component for foreign investment. This results in fear that one of the largest stimulants of our economy at present, that is the housing market, will now track downwards. Potentially this issue will have a knock on effect to tourism and other vital investments needed in our country.

Yes, this is a highly motive topic, however, we have to be very careful that in believing we are protecting the interests of Australia and Australian home buyers, we are not actually adding to the problem of a housing shortage. This is a very tricky balancing act.

39 Southern Cross Drive, Cronin Island

Please take a look through 39 Southern Cross Drive, Cronin Island. Make sure you come along and have a look at the upcoming open homes, It will surprise you on the upside when you see it in person. Jackson Paradise (0402 692 544) and Paul Collins (0410 456 729) are the marketing agent, please don’t hesitate to contact them.

Property goes to auction on Thursday 27th October 2016 and the seller has bought elsewhere and wants the property sold on the day.

Last chance to grab a table or tickets to the annual Business Lunch powered by Supercars next Thursday 20th October. It is always a fun afternoon as we run shoulders with the top Supercar drivers. Contact Selena Carson via s.carson@rwsp.net .

Back to you in a fortnight’s time with more news about the real estate market. Stay safe.

Kind regards,
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group

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