Insight

26.10.16  Property Trends

 

Sydney Real Estate: Where have all the offshore buyers gone?

If you’re an active buyer or seller in Sydney's eastern suburbs, you may have seen a slowdown in offshore purchasers.

Foreign buyers have been noticeably slowing down in the eastern suburbs for the past 18 months, and the big question is: why? We believe the impact of policy changes over the past 12 months and a subsequent shift in sentiment is really starting to be felt.

Last year, there was an influx of offshore buyers, particularly from China, who were very interested in Sydney’s eastern suburbs. Largely looking at new apartments or prestige homes, these buyers frequently outbid other purchasers at auction.

But so far in 2016, inquiry levels have dropped by about a third from this segment of the market. In 2013/2014, Chinese inquiries to our offices were at about 50 to 60 a week. By the first half of 2016, it has dropped to about 35 inquiries a week. As a result, it’s no surprise there are fewer record-breaking sales this year. In part, this drop in inquiry could be due to the slowing of the building boom, given foreign buyers predominantly purchase brand new apartments.

Much of this slowing is due to legislation in China making it difficult to move money offshore, but it’s also to do with changes on Australian soil as well. The decision from many lenders and banks not to give financing to those whose income is coming from offshore, particularly when considering the Yen, has impacted offshore buyers directly. Not only are they only able to borrow less, but some would-be buyers see this as offensive or concerning.The NSW Government is also now levying an extra 4% stamp duty surcharge on offshore buyers that began in June. This cost is on top of stamp duty that was already payable. This may have some buyers recalculating whether it’s time to get their hands on new real estate.

We have felt this change in sentiment rather significantly at our office, where property prices are already substantial even without the additional expense. We are seeing some buying activity, and it’s unlikely the demand from overseas will ever dry up completely, but the interest we’re getting isn’t from new money or new purchasers from offshore.

It’s investors we’ve already had on our books, who are moving money around and applying for permanent residency. Many Chinese investors have started consolidating their investments in the background, particularly apartments, and putting the money into house and land developments instead.

Outside of China, there has, however, been a surge in buying power from Vietnam, Indonesia and India. There are also many Chinese buyers moving around domestically, often selling up in Melbourne and coming to Sydney. For instance, we’ve seen some home sellers trading up their luxury homes in Toorak and looking to buy a waterfront home in Sydney’s eastern suburbs.

Many of them don’t work in Sydney and have businesses based in China, and prefer a waterfront home on 700 square metres to a mansion with a tennis court. Over the long-term, the eastern suburbs will continue to be a desirable location for offshore buyers, particularly as the light rail is built.

As education is high on many foreign buyers’ wishlist, there’s really no better place to consider.

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