How COVID-19 Changed Australian Foreign Property Investment Market

Published 19 December 2021 by Team :Different

At the start of the COVID-19 pandemic, many experts predicted Australia’s property market would drop up to 20% in value. But, this “worst case scenario” never actually happened. 

In fact, Australia’s good management of the pandemic, significant Government assistance and historically low interest rates have all caused the Australian property market to skyrocket over the past two years.   

For overseas investors thinking of buying an Australian foreign property investment, this changing market offers new opportunities to tap into. 

Let’s run you through how COVID-19 has impacted Australian foreign property investments and how foreign investors in the Australian property market can succeed in 2022 (and beyond).

Impacts on Australian foreign property investment

When the pandemic was officially declared in March 2020, the Australian government took a bunch of swift steps that impacted Australian foreign property investments. 

First up, international borders were closed to all non-citizens and non-residents from the 20th of March, 2020. This stopped all foreign investors from travelling to Australia to secure their next foreign property investment. 

Instead, foreign investors needed to rely on local property experts (like buyers agents, mortgage brokers and property managers) to secure and lease their foreign investment in Australian property. 

But the biggest change for foreign investors looking to secure real estate in Australia was this: all foreign investment purchases needed to be screened and approved by the Foreign Investment Review Board (FIRB). 

In pre-pandemic times, only investments that hit certain price thresholds would be checked in this way. The Australian government wanted to put extra measures in place to make sure Australian buyers, investors and businesses would be protected in these challenging times.

The result? While we don’t have a full picture of the impact this had on foreign investors and Australian foreign property investment, we do know that there was a drop in the number of approvals for foreign residential property investments (reducing by 455 to 7,056 in the 2019/2020 financial year). 

To get around these obstacles, some overseas investors have been investing in the Australian property market without seeing properties in-person. With the right local help on the ground, plenty of foreign investors have still been able to make smart investments and capitalise on Australia’s booming real estate market.

Impacts on the Australian property market

While there’s a few extra hoops to jump through as an overseas investor making an Australian foreign property investment, there are plenty of reasons to have the Australian property market on your radar. 

Even with international borders shut, property prices have managed to climb to record-breaking heights. Plus, new pockets of opportunity have opened up for investors away from the capital cities as remote working becomes the ‘new normal’.

To give you a complete picture of the Australian property market, here are three big changes that have taken place since the pandemic kicked off.

Property prices have skyrocketed

Even during extended lockdowns, residential property in Australia saw it’s strongest price growth on record. In the June 2021 quarter alone, prices rose 6.7% nationwide. To put that into perspective, that's the fastest rate of growth since records began 20 years ago. 

In Sydney alone, house prices have jumped by an incredible 30.4% in the past 12 months, a phenomenal rate of growth.  

So, what sparked these sky-high prices? There are three key factors that caused this surge:

  • Record low interest rates (currently at 0.1%) have made it easier for buyers to secure approval for a home loan.
  • Significant Government stimulus and support packages have helped more Australians maintain a living wage (thanks to programs such as JobKeeper and JobSeeker) and even helped home buyers get into the market.
  • Low stock levels have made it more competitive for buyers to secure a property, pushing prices up even further.

Sales activity has peaked in post-lockdown periods

Even extended stay-at-home orders and a drop in Australian foreign property investment haven’t slowed down the Australian property market. While property purchases slowed down during lockdowns, market activity boomed as soon as restrictions eased across the country.

Recent research from CoreLogic shows that while auction activity slowed down during lockdowns, buyers bounced back quickly as soon as restrictions eased. With open homes and in-person auctions back on, property sales and prices have continued to climb.

Regional areas have been booming too

One of the most interesting changes to the Australian property market has been this: the regional property market boom of 2022.

With more CBD workers able to work from home, a stack of regional areas across Australia have seen a big surge in demand. Now, there are over 50 regional postcodes where median property prices are over $1 million.

This trend has opened up big opportunities for investors (especially those considering an Australian foreign property investment) with a stack of new areas showing strong demand, low vacancy rates and good prospects of long-term price growth.

What’s ahead for foreign investors in the Australian property market?

As international borders reopen and COVID-19 restrictions ease, many investors are wondering, “is now the right time to make a foreign investment in Australian property?”. 

As we head into 2022, there are plenty of opportunities and trends foreign investors should keep in mind when deciding where to invest next. So, let’s take a look at three predictions for what to expect from an Australian foreign property investment in the New Year (and beyond).

Property prices are expected to peak in early 2022

After such a rapid period of property price growth, it’s no wonder that things are expected to slow down in 2022. According to the latest report from SQM Research, house prices are tipped to peak in early 2022 before softening across the second half of the year.

With local lending restrictions expected to be tightened in the coming months, overseas investors looking to make an Australian foreign property investment are in a good position to capitalise on lower competition in the Australian property market.

Brisbane is set to experience the strongest capital city price growth in 2022

While Sydney and Melbourne (Australia’s biggest capital cities) are tipped to see a drop in prices, there is one capital city with huge potential for growth in the New Year: the sunny city of Brisbane in Queensland.

In fact, average property prices in Brisbane are anticipated to rise by anywhere from 8% to 14% in 2022 (offering huge opportunities for investors looking to make Australian foreign property investments).

Why? Well, property prices in Brisbane haven’t been overvalued to the extent that other capital cities in Australia have. Plus, many Australians are deciding to make the interstate move into Queensland in 2022 (which will push up demand and property prices).

Apartments in Sydney and Melbourne are predicted to rise in demand

Plus, with international students returning and overseas migration coming back in 2022, apartments in Australia’s global capital cities of Sydney and Melbourne will be hot property in the New Year for those looking to make an Australian foreign property investment. 

These two cities tend to see the highest volume of international arrivals, with many students, tourists and migrants looking to settle in CBD apartments and units. 

This presents a big opportunity for foreign investment in Australian property to capitalise on this trend and prepare for the strong rental market conditions in Sydney and Melbourne in 2022.

Final thoughts:
How to succeed in Australian foreign property investment in 2022

There are a lot of big opportunities for overseas investors in the Australian property market in the New Year. 

By securing an investment property in an area predicted to rise in value and demand in 2022, you can set yourself for strong, stable rental returns (and even the possibility of making a capital gain, too).

Plus, once you’ve made your property investment, it’s worth getting a local expert on-the-ground to help you secure tenants, keep your property in good condition and handle all the paperwork on your behalf.

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Disclaimer: The views, information, or opinions expressed in this blog post are for general information purposes only and should not be relied upon. We have not taken into account specific situations, facts or circumstances, and no part of this blog post constitutes personal financial, legal, or tax advice to you. You should seek tax advice from your accountant, specific to your situation.

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