Lack of foreign investors to hit rental supply

The continuing absence of overseas investors from the Australian property market, added to many local investors’ reluctance to buy new and off-the-plan properties, may lead to a significant undersupply of rental properties in he near future.

So says one of the country’s top buyers’ agents in the wake of the latest Foreign Investment Review Board (FIRB) report.

“Over the past decade, new apartment projects have largely been funded by superannuation fund investors and non-resident investors, mainly from China,” says Pete Wargent, from buyer’s agent platform BuyersBuyers.

“Neither cohort is buying heavily anymore as credit has tightened, and as the HomeBuilder stimulus impact recedes, we’re heading squarely for a shortage of rental properties in some cities and locations.

“The number of residential real estate approvals reported by the Foreign Investment Review Board fell another 38 per cent in the 2021 financial year to sit at the lowest level in a decade-and-a-half, with no sign of the multi-year slowdown reversing,” Mr Wargent added.  

The value of FIRB residential investment proposals also contracted another $6.7 billion lower to just $10.4 billion in the year to 30 June 2021.

“the comparative figures for previous years may not be directly comparable for several reasons, but back in 2016 the equivalent figure was many times higher at over $70 billion”.

BuyersBuyers CEO Doron Peleg said, “you can analyse out the numbers by state and development type, but the residential investment figures are now so immaterial they are not going to move the needle for new dwelling supply in any event.”

“Queensland picked up some investment in new developments, but overall the figures were very low for residential property, with commercial real estate projects attracting the bulk of foreign interest and approvals surging to $82 billion as Australia’s economic recovery took hold.”  

“While our analysis shows some areas have enough new residential developments in the pipeline, nationally rental vacancies continue to tighten as the Australian economy improves” Mr Peleg said.

Pete Wargent of BuyersBuyers said there were a range of factors causing the lack of foreign investment in the residential sector.

Mr Wargent said, “firstly, there’s barely any lending to non-resident investors these days. Once common among even larger lenders, regulation has effectively shut this lending channel down.”

 “Secondly, state stamp duty surcharges and taxes have also hugely discouraged foreign buyers. 

“Thirdly, Australia’s relationship with China has cooled over recent years, while the ongoing absence of Chinese international students has disrupted one of the possible channels for investment.” 

“And fourthly, COVID-19 restrictions and international border closures dissuaded some prospective buyers from travelling to inspect projects and developments” Mr Wargent said.

Mr Wargent said that policymakers may need to take a look finding ways to allow non-residents to invest in new residential properties again.

“In our experience Australian investors and prospective landlords increasingly tend to steer clear of new apartment projects these days due to the increased risk of loss on resale. Meanwhile residential vacancy rates continue to tighten, with little respite in sight,” he said.

About BuyersBuyers 

Flat Chat is not affiliated in any way with BuyersBuyers and doesn’t necessarily endorse their services but you can find out more about them by clicking on that link and going to their website. 

TMeanwhile, they say the company “connects people looking to buy a property with some of the best buyer’s agents around Australia.

“We aim to level the real estate playing field to give first time and experienced home buyers and property investors a personalised service with the advantage of having a property expert working for them, serving only the buyer’s interests.

“Our national network of top buyer’s agents is the largest in Australia and offers some of the most affordable buying solutions on the market. All of our buyer’s agents are licensed, experienced, and are committed to working in the best interest of our clients. 

“We offer excellent value for money with very competitive and affordable fees and no commissions. What you see is what you get.

“Our bespoke property research and tools enable buyer’s agents and buyers to stay informed on market trends, and our insightful property reports help determine the best places to buy. That’s why we are quite simply, the better way to buy property.”