While the Australian Taxation Authority has been in charge of regulating foreign investment in Australia since Joe Hockey's announcement midway through 2015, the Foreign Investment Review Board (FIRB) still manages all of the data relevant to this market.
In the latest annual report from the FIRB, which covers the 2014-2015 financial year, there was a great deal of information that illuminates just how big this market is getting. Here are four figures to illustrate the growth of foreign investment in residential real estate, and what that means when you try to find the right property.
This is no small number – in fact, it is how many more foreign investment approvals there were in 2014-2015 than in 2013-2014. With 37,953 proposals overall in the most recently completed financial year, there is clearly a huge increase in interest for what Australia has to offer.
In fact, the FIRB notes that there were more than three times as many approvals as in the 2012-2013 financial year. With ongoing low interest rates (near 50 year lows in some cases) and continued capital gains on the table, property investment is only growing as an opportunity for overseas buyers.
2) $60.8 billion
The above figure is the total value of residential real estate approvals given to foreign buyers in 2014-2015. The number of approvals increased by about 57 per cent year on year, while the total value of foreign investment nearly doubled (in 2013-2014 it was $34.7 billion).
As interest in Australian real estate grows, the market is also becoming more valuable.
This goes to show that at the same time as interest in Australian real estate grows, the market is also becoming more valuable. Even with capital growth slowing in many capital cities, the Australian Bureau of Statistics has recorded price rises of 8.7 per cent over the past year weighted across all of our capital cities. This is growth that will prove irresistible to many an investor – both local and foreign.
Over the 2014-2015 financial year, there were no foreign investment proposals met with rejection. While the FIRB did put conditions on 40 per cent of the applications, everything was deemed to be in line with legislation at the time. The year before, there were three proposals rejected.
Over the 2014-2015 financial year, there were no foreign investment proposals met with rejection.
Since then. Mr Hockey announced the tightening of legislation, and there have been ongoing investigations. On January 20 this year, the ABC reported that eight homes owned by foreign investors had to be sold as they were in breach of the law.
With tighter regulation and higher fines, it makes it all the more important for foreign investors to get appropriate investment and mortgage advice before buying.
While there has been a lot of talk about China's role in foreign investment, it is actually only responsible for 4.4 per cent of all money flowing into the country for investment purposes. With a $46.6 billion flow of approved investment over 2014-2015, however, it did represent the highest level of funding from any one country over this period.
It remains the fifth ranked country for foreign direct investment, however. This indicates that while there tends to be concern about this market, China is in fact not taking up as much space as it is in the headlines.
While capital growth and investment lending has slowed down compared to 2015 levels, Australia remains an intriguing prospect for anyone that wishes to place their money in a relatively safe asset. However, whether investing from Australia or overseas, it is crucial to remember there is no such thing as a one size fits all solution for creating wealth through real estate.
The REIN Group's property investment seminars might be the key you need to understand how to make the most of the market.