Powered by MOMENTUM MEDIA
subscribe to our newsletter sign up

 

Soaring foreign property investment set to slump

China

While foreign purchases of Australian residential property have increased ten-fold over the last five years, this is set to drop amid greater regulation in a slowing market. 

According to the QBE Housing Outlook report released today, the surge in foreign investment will be significantly constrained in the next three years.

“Slowing price growth and low residential yields will encourage investment elsewhere [and] banks have tightened lending policy toward overseas buyers, such as not accepting foreign income in serviceability assessments, and reducing loan–to–value ratios depending on residency status,” the report said.

Advertisement
Advertisement

The study also pointed to the state surcharges that have been imposed in New South Wales, Victoria and Queensland on stamp duty of 3 per cent, 4 per cent and 7 per cent respectively to foreign purchasers as major deterrents.

On top of this, foreign residential owners must pay a 0.75 per cent land tax surcharge in NSW, while in Victoria the absentee owner land tax is set to rise to 1.5 per cent from 0.5 per cent.

These are likely to quell the increase in foreign investment that has occurred over the last five years, growing tenfold from $6.09 billion in 2009-10 to $60.75 billion last year.

The introduction of these measures comes at the same time that tighter capital controls are being implemented in China, a central source of foreign investment in the Australian property market, limiting capital outflow.

According to QBE, some dwellings are will be harder hit than others.

“The headwinds for foreign investors are expected to have the greatest impact on the new dwelling market, particularly the apartment sector, where substantial pre–sales are required for a project to obtain development finance for construction. For those that have already purchased off–the–plan, it will become more difficult for foreign investors to settle, particularly if a lower loan–to–value ratio and potential lower valuation requires a significantly higher equity contribution by the purchaser.”

Fewer settlements could in turn place greater downward pressure on apartment prices, if they are placed back on the market at lower prices, the report warned.

Soaring foreign property investment set to slump
China
nestegg logo
subscribe to our newsletter sign up
FROM THE WEB
Recommended by Spike Native Network
Dr Terry Dwyer, Dwye... - He did not seem to have read the Coronation service and realized the Sovereign is the Lord's Anointed and that there was a Restoration so private.......
DavidL - Why has it been used in high rise construction if it has never been approved for that purpose? How does it get past building inspectors in the first place?....
Mort - This is absolute nonsense from the shadow treasurer, who should know better. Why has Labor excluded non tax paying Commonwealth pensioners, if not for.......
Howard Patterson - It is not a matter of banning the product, it may be perfectly safe on a low rise building. When all the humbug is stripped away, the fact is that.......