Chinese buyers lead foreign residential purchases

The Australian residential real estate market has seen substantial growth over the June quarter, with buyers from throughout Asia and the United Kingdom revealed as the top sources of foreign investment, according to the latest Foreign Investment Quarterly Report.

Released last week by The Treasury, the report revealed buyers from China made up the greatest percentage of foreign property buyers in the June quarter (1 April to 30 June 2023), with 826 investment proposals granted in the June quarter alone, up from 606.

The increased number of approved proposals for investment in real estate by foreign buyers also saw a rise in value, reaching $1.1 billion up from $700 million in the previous quarter.

After China, buyers from Hong Kong, India and Taiwan had the next highest number of approvals in the June quarter (increasing to 183, 116 and 110 respectively).

Furthermore, because of the increase in approvals, the value of approved residential real estate proposals from buyersin these countries over the quarter reached $200 million, $100 million and $100 million, respectively.

However, despite the overall increase, approvals from the United Kingdom dropped in the June quarter, to 54, down from 61 in the previous quarter. The value also fell to below $100 million.

For the full 2022-23 financial year, the report revealed that proposals from Chinese buyers reached $3.4 billion in value, dwarfing Hong Kong which achieved only $600 million for the 2022-23 financial year.

Vietnam ($400 million), Taiwan ($300 million) and India ($200 million) were the next closest regions, all growing in value over financial year.

“Revenge buying” by Chinese purchasers after travel struggles

Daniel Ho, the co-founder and group managing director of international real estate technology group Juwai IQI, said the increased value in residential real estate approvals from China could be seen as “revenge buying, after three years in which it was complicated for [these buyers] to travel to Australia”.

Mr Ho commented: “Buyers from mainland China account for 57 per cent of all approved for in-home purchases, and that rises to 67 per cent when you include Hong Kong buyers.

“Chinese buyers purchased homes worth some 40 per cent more than in the prior year. Few of these buyers are investors. Most Chinese are purchasing for their use and are on the path to becoming new Australian citizens,” he said.

The Juwai IQI group MD suggested the strong pace of property buying would slow in the current financial year, but “the aggregate dollars invested will increase”.

Mr Ho commented: “Chinese buyers aren’t done yet. The border has only been open for nine months. Flights have not gotten back to their pre-Covid levels. There are delays in obtaining passports and visas.

“Many Chinese holding Australian permanent residency still have not yet made the move,” the co-founder and group managing director said.

Speaking to Mortgage Business, Home Loan Experts mortgage broker Sheng Ye said despite the rising costs associated with residential real estate purchases, the majority of Chinese buyers are “cashed up and do not require a loan”.

Mr Ye added: “They [foreign buyers] know that it’s difficult and expensive for them to obtain finance when using their overseas income.

“I only have a few leads from expats in China, I haven’t seen a big surge.”

He revealed that those in China looking to purchase in Australia did not, generally, require a mortgage due to the comparable real estate prices.

“If the client sold their Shanghai CBD property, say a 100sqm apartment, they will get A$2.5 million in cash, and they could purchase a property in Australia with the cash (without needing a loan),” Mr Ye stated.

[Related: Home values expected to reach ‘new record’ in 2023]