Asian investors still Australia’s heaviest hitters: report

Crown Resorts’ One Barangaroo project under construction in Sydney. Picture: Hollie Adams

Southeast Asian and Chinese buyers remain the biggest investors in Australian residential real estate despite tough, ongoing government restrictions on foreign ownership.

Knight Frank’s global head of research, Liam Bailey, says world governments will continue to install regulations to maintain a balancing act between would-be offshore investors and cashed-up locals buyers.

“Governments are looking to ensure markets are performing well not just for investors but for local residents,” says the London-based Bailey, who was promoting Knight Frank’s Wealth report in Sydney this week.

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“It’s a narrative we are seeing everywhere over the past few years … particularly in Australia, New Zealand and Canada.

“Wealthy people in Southeast Asia want to invest in other regions. We need to expect that governments will become more active in trying to manage that process.

“The government is trying to balance the demands of overseas investors with domestic residents. The restrictions seen here have been seen in other countries.”

At present, foreign investors are not allowed to buy existing homes in Australia but can buy new properties, off-the-plan apartments and vacant land. Non-resident foreigners wishing to buy residential property in Australia must first obtain Foreign Investment Review Board approval.

What you have seen in Australia is the same as what we have seen in Singapore, Hong Kong, New Zealand, the US and Canada

Knight Frank would not be drawn on the number of offshore buyers it had attracted for Crown Resorts’ Barangaroo development in Sydney, but it is believed about one-third of the 82 apartments have sold. Senior sources said four whole-floor apartments had sold for more than $40 million apiece.

Some buyers were probably offshore, with Mr Bailey saying that Australia remained a huge, attractive market and was one of the largest liquid markets on the doorstep of cashed-up Southeast Asian and Chinese buyers.

Asian buyers were also favoured for their willingness to buy off-the-plan apartments. “In London, Chinese are willing to buy off the plan, which is a net positive in terms of construction volumes … and you are seeing the same trend here,” he says. “The fact the Chinese investors are willing to buy off the plan helps de-risk development schemes and forward fund developments.”

On the development side, Bailey says he does not think the UK has seen the same volume of developer interest from Asians as Australia had. “The reality is Chinese developers are stepping back,” he says. “Part of the driver is the government has put … restrictions on foreign investors. What you have seen in Australia is the same as what we have seen in Singapore, Hong Kong, New Zealand, the US and Canada.

“Added to the restrictions on foreign buyers in Australia, the Chinese government has also done its bit to slow down cash outflows from the mainland.

“The Chinese government for several years has been very conscious of wealth outflows from China.”

Bailey says that as more wealth is created around the world, “there is an ongoing demand for diversification via geography”.

He says Australia will always see strong interest from the US, South Africa, the UK and other European markets, but the real growth area for investors was in Asia.

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