The head of the world’s leading Chinese website for international real estate has praised the latest Foreign Investment Review Board annual report as proof the current system is working well.
Juwai CEO Charles Pittar said it showed foreign investment was going right where Australia wanted it and was one of the few bright spots in the economy.
FIRB chairman Brian Wilson reported last week the value of approved foreign investment had risen by 29 per cent in 2015-16 to $248 billion, with Chinese investment making up the largest proportion at $47 billion.
He said the increase was predominantly driven by higher investment in the real estate sector, where Chinese buyers dominated.
The FIRB report showed Chinese buyers sank a total of $32 billion into residential property in 2015-16. This compared with $8 billion from the next highest source of real estate investment, the US.
Chinese buyers clearly have two clear property preferences – 44 per cent of all foreign real estate investment went into Melbourne and 32 percent into Sydney.
But the report also noted the rate of growth was significantly lower than in the previous 12 months, which James Pittar said had also been evident in his company’s inquiry levels.
“Over the past year we have seen growth in Chinese investment level off from a white hot 90 per cent growth in Chinese buyer inquiries via Juwai.com, to 28 per cent in 2016,’’ he said. “Growth will probably be lower still this year unless it receives some sort of push from loosening regulations in China.’’
And, in an interesting sidebar, the FIRB report included the findings of a December 2016 Treasury working paper which examined the effect of high foreign real estate demand on prices.
Over a period of mid-2010 to early 2015 Treasury found foreign demand increased prices by just $80-$122 per quarter in Melbourne and Sydney and pointed to supply constraints as the main reason for surging prices.
Highlights of the FIRB annual report
- For the third year in a row, China was the largest source of overall approved investment ($47.3 billion)
- $32 billion of this went into real estate, a 30 per cent increase over the previous year
- Investment in new dwellings accounted for 85 per cent of all residential FIRB approvals, while interest in established properties fell 36 per cent
- A total of $72 billion in residential real estate investment was approved in 2015-16, a 19 per cent increase over the previous year.
A full copy of the report is here.
