Source: Myriam Robin
Foreign buyers are purchasing new housing in New South Wales and Victoria at a rate of $8 billion a year - a figure the equivalent of one in five new homes completed across the two states.
The figures, available for the first time through a freedom of information request, come from state governments which now collect taxes from foreign buyers when the property is settled. The figures reveal the size, source and changes in foreign demand for Australian housing.
According to a new paper by Credit Suisse analysts Hasan Tevfik and Peter Liu, who filed the FOI, the data "implies foreigners are acquiring 25 per cent of newly completed supply in NSW and 16 per cent in Melbourne, or 21 per cent if we combine the two states". The total value of new houses in both states was $39 billion over the relevant 12 months.
Foreign buyers are restricted to only buying new or off-the-plan properties.
Credit Suisse's analysts believe Australian housing is at its peak in the cycle, with Sydney house prices having more than doubled since 2009 and Melbourne prices up 90 per cent. But they are hopeful the demand from China will moderate the severity of any downturn in housing prices.
"Investors could be too cautious. The data revealed by the NSW and Victoria state governments gives us more confidence that Australian housing will enjoy strong demand from abroad for some time to come."
Chinese buyers - defined as those from mainland China, Hong Kong, Macau and Taiwan - accounted for 80 per cent of the properties sold to foreign buyers. This makes sense because, the paper points out, while Australian housing is likely at the peak of its cycle, it's still cheaper than buying an apartment in China's major cities.
"It is hard for many Australians to think of property as a cheap asset, but from a Chinese investor's perspective, there could be plenty of value in Aussie housing," Mr Tevfik and Mr Liu wrote.
"The median price for a two-bedroom apartment in Shanghai is around $900k which is 25 per cent more than the median apartment price in Sydney. Also, the gross rental yield in Shanghai is a paltry 1.5 per cent and is less than half the gross rental yield for the equivalent property in Sydney. Yes, our property is expensive when we compare it to our own history, but it is cheap when compared to Chinese property."
The data, which is broken down month-by-month for a six-month period from July 2016 to January this year, shows that the value of settlements from Chinese buyers rose in November and December, despite the Chinese government having begun to put in place capital controls attempting to limit foreign investment late last year.
Local banks do not offer mortgages to buyers from abroad, so the rise in settlements towards the end of the year shows Chinese buyers were still able to secure the finance to complete transactions despite a clampdown on money leaving China. Further, more stringent Chinese capital controls were put in place in early January, the effect of which is not yet captured by the data released to Credit Suisse.
The average house purchased by a foreign buyer cost $1.04 million, but this figure was heavily skewed by American buyers, who spent around $2.35 million per property on average. Purchasing properties for around half the price, on average, were buyers from Indonesia, New Zealand, and the United Kingdom. Indian nationals spent, on average, just $420,000 on a property.
