Are foreign buyers returning to the Aussie property market?

By Jon Bragg

April 27 2022
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The share of new property sales attributable to foreign buyers has reached its highest level in nearly two years.

NAB’s latest residential property survey has revealed a sharp rise in foreign buyer demand for new property during the first quarter of this year.

According to the bank, foreign buyers accounted for 7.9 per cent of the demand for new property in Q1, a significant increase from 4.6 per cent in Q4 last year.

This was also the third consecutive quarter in which the share of demand for new property from foreign buyers increased, lifting to the highest levels since mid-2020 but still below NAB’s survey average of 9.3 per cent.

Across the states and territories, NSW recorded the sharpest increase in demand for new property from foreign buyers, rising from a share of 3.9 per cent in Q4 2021 to a four-year high of 10.3 per cent in Q1 2022.

Foreign buyer activity also picked up in Western Australia to the highest market share in over five years (10.3 percent), however activity in Victoria (7.3 per cent) and Queensland (5.0 per cent) is still well below average.

While acknowledging the early signs that foreign buyers could be returning to the market as borders reopen, NAB noted that a “mixed picture” had emerged.

This was demonstrated by the demand for established property from foreign buyers, which remained broadly unchanged from 2.3 per cent in Q4 2021 to 2.5 per cent in Q1 2022 against a survey average of 5.4 per cent.

“In established housing markets, the share of foreign buyers was equal highest in Victoria where it slightly fell to 2.9 per cent and NSW where it rose marginally to 2.9 per cent - though both states continued to track well below average levels of 6.8 per cent and 5.8 per cent respectively,” NAB group chief economist Alan Oster said.

“Foreign buyers were also a little more prevalent in Queensland at 2.1 per cent and WA at 2.0 per cent, but also tracking below average levels of 4.9 per cent and 4.6 per cent respectively.”

NAB’s survey also found that first home buyers accounted for 40.5 per cent of sales in the new housing market during the first quarter, the lowest level in two and a half years.

Housing market sentiment, based on the views of property professionals on housing prices and rents, held steady at 58 points as growing rents offset slowing house prices, above an average of 17 points.

However, confidence for the next 12 months fell for the fourth quarter in a row and confidence for the next two years dropped below average after the third consecutive quarterly decline.

“With interest rates widely tipped to start rising this year, property professionals also identified rates as a growing impediment for new housing development in all states, and a bigger impediment for established home buyers, with interest rates now impacting these buyers more than at any time over the past 10 years,” NAB said.

The bank said its property price outlook was broadly unchanged with a rise of 2.5 per cent anticipated in 2022 and an “orderly correction” of around 10 per cent in 2023.

Falls of 11.4 per cent are expected in both Sydney and Melbourne during 2023, with less substantial falls in Perth (-8.1 per cent), Brisbane (-5.8 per cent), Adelaide (-5.8 per cent) and Hobart (-4.1 per cent).

“Overall, the housing market has turned slightly quicker in Sydney and Melbourne than we had expected in early 2022 but outperformed in the smaller markets,” said Mr Oster.

“We expect growth to slow in Brisbane and Adelaide, before turning negative at the back end of 2022, alongside falls in the larger capitals. This is in line with our outlook for the RBA to begin steadily increasing rates from June this year, taking the cash rate to 1 per cent by year’s end and 1.75 per cent by end-2023.”

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