Did you think closed international borders and a global pandemic would stop foreign property investment in Australia? Think again.
Over the past few years, foreign buyers have continued to show strong interest in the Australian property market as both owner-occupiers and investors - with good reason. The latest Foreign Investment Review Board annual report shows there has been a significant leap in foreign investment (up by 15.5%, the highest level in three years).
Despite a tightening of lending regulations around home loans and an increase in foreign investment taxes and stamp duty, international investors are continuing to see Australia as a reliable market to invest in.
So, what trends are on the horizon for foreign property investment in Australia in 2022 (and beyond)? Let’s find out!
What trends are we seeing in foreign property investment in Australia in 2022?
The past 12 months have seen booming property prices across Australia. But what trends are we seeing this year, particularly for foreign property investment in Australia?
1. Strong investment in commercial property
First up, we’ve seen incredibly strong foreign property invested in commercial properties across Australia. In 2021, a whopping $16.6 billion was invested by foreign investors in offices, retail spaces and hotels.
Some of the strongest activity has been seen from Singapore-based investors, followed by North American investors.
Why? Well, Australia’s commercial market has performed well in comparison to other international markets. This gives investors plenty of reason to take their finances into a strong economy, like Australia.
As we look ahead to the rest of 2022, foreign investors are expected to continue snapping up commercial property thanks to Australia’s booming property market, history of good returns, and a stable local government.
2. Office buildings are a key focus for foreign investors
Speaking of commercial property, a key focus for foreign property investment in Australia has been the asset class of office buildings (proving the most invested asset class among foreign investors).
Experts are predicting a rise in the value of office assets in 2022, as more foreign investors capitalise on Australia’s stable, low-interest-rate environment.
After big foreign property investment transactions in 2021 (like the sale of Sydney's Grosvenor Place office tower), the office market saw an increase in foreign activity the following year.
3. US investors expected to show continued interest in Australian houses
When we look at the residential market, the biggest foreign property investment trend we’re seeing is a surge in US investor interest.
The latest FIRB report shows that US-based investors secured a whopping $13 billion worth of property (followed by investors in Singapore and mainland China).
Out of all the types of residential properties available, US investors have been showing the strongest interest in established houses (with approvals up by $1.7 billion on the previous year).
4. Open borders may see a return of residential investors
While overall foreign property investment has fallen to its lowest level in 15 years, many are predicting that things will pick up with the reopening of international borders.
With international students, tourists and even foreign investors now able to re-enter the country, foreign buyer activity is expected to increase throughout 2022.
This could mean a rise in foreign investment in residential property, along with the strong commercial activity we’re currently seeing.
Why are foreign investors attracted to the Australian property market?
Despite the challenges the pandemic has presented, Australia’s property market has proved incredibly strong over the past three years. This is one of the key reasons that foreign buyers and investors are drawn to making a foreign property investment in Australia.
Here are three of the key benefits and drawcards to investing in Australian property as a foreigner:
- Well-managed COVID-19 response: While lockdowns and outbreaks did occur, Australia was able to keep case numbers relatively stable throughout the pandemic. Plus, strong government assistance and financial stimulus keep Australia’s economy in a good position. As a result , Australia has emerged with low employment and a booming property market.
- Exponential property price growth: According to CoreLogic, median property prices nationwide have risen by over 20% in 2021 alone. This gives foreigners the confidence that they have a strong chance of making a capital gain from foreign property investment in Australia.
- Tight rental property market: Rental properties are in serious demand in key markets such as QLD, NSW and VIC. Historically low vacancy rates (as little as 0.1% in suburbs like Brisbane) mean foreign investors can also secure stable returns and a reliable source of passive income.
Should foreign investors capitalise on the Australian property market in 2022?
Absolutely yes! There’s no shortage of opportunities for foreigners in Australia's booming market. By knowing what suburbs to watch and what types of properties are performing well, you can put yourself in the best position to score both stable rental returns and a high chance of capital growth, too.
Here are a few tangible tips to help you get into the market and make the most of Australia’s strong property opportunities:
- Invest in one of Australia’s highest capital growth suburbs such as Peakhurst in NSW (with an annual median value increase of 47.6%) or Charters Towers City in QLD (boasting a 45.6% rise in median property values).
- Find one of Australia’s best rental yield suburbs that offers consistent rental growth and vacancy rates under 3%.
- Consider capitalising on Australia’s regional property boom and secure a rental property in a well-located, desirable regional or rural area.
If you’re a foreign resident and you’re convinced that Australia is the right investment choice for your property portfolio, then one of the first things you’d want to do is get Foreign Investment Review Board (FIRB) approval.
How can foreigners buy property in Australia?
Foreign investors can secure a property purchase as long as they meet the eligibility requirements set out by FIRB. This is the Australian government’s regulatory body that reviews and approves foreign investment applications, so it’s pretty important to get their go-ahead before you set down any cash.
One of the responsibilities of FIRB is to ensure that foreign investments “create additional jobs in the construction industry and help support economic growth.” Within these criteria, the property options for foreign buyers and investors are somewhat limited.
There are broadly two types of property foreigners can purchase in Australia:
- New buildings or any kind (no conditions apply).
- Vacant land with a requirement to build a new residential property within four years.
Going outside or breaking these foreign property investment rules can mean hefty fines of over $150,000 and even up to three years in prison - so always stay within the official guidelines!
To register an application with FIRB, just fill in the required details, and pay the relevant application fee, which will be based on the estimated purchase price of your investment property. You should hear back within 30 days about the outcome of your application.
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