Foreign Buyers Still Active In Sydney’s Property Market

There’s little doubt that lockdown has impacted the flow of overseas buyers into the Sydney property market - but not necessarily in the ways many people expected.

Despite border closures, foreign buyers remain active in the property market here in Sydney’s eastern suburbs. Here’s what the latest data reveals.

1. Expats have been a driving force in our local property market

We’ve written previously about the flood of ex-pats returning to our shores and competing in our property market. It’s fair to say we’ve met a lot of them over 2020 and 2021 at auctions, open homes and through online enquiries.

We knew returning expats were becoming a real presence in the eastern suburbs and that they were contributing to the competition for properties in both the sales and rental market. But the latest figures reveal just how enormous their impact has been.

In the year to March 2021, the Department of Foreign Affairs estimated that close to half of the one million Australians living overseas returned home. That’s 500,000 people - or the equivalent of a city the size of the Gold Coast and bigger than Canberra or Newcastle.

So, despite concerns that lower than usual immigration is slowing the economy, we actually had roughly the same number of new migrants we’ve received for the past decade - they just happened to be Australians. Every one of these people needed a place to call home, with many keen to establish roots by buying property and settling back into the Aussie lifestyle. This helped push property prices higher, especially in lifestyle locations and premium areas, such as here in Sydney’s eastern suburbs.

There are still a lot of Australians living overseas (another half a million of them) and many of these are looking to secure a foothold in the Australian property market too. While some have come here temporarily over the past 18 months to check out a property, most are buying sight unseen for when they do return.

Then there’s a third group of ex-pats, who are buying with no intention of coming back but who simply see the value in investing in Australian property, given ultra-low interest rates and the potential for long-term capital growth.

2. Foreign buyers are also still very active

In March 2020, Australia closed its borders to all non-citizens and non-residents. On the face of it, you’d imagine that this would have a massive impact on the number of overseas buyers purchasing real estate here.

Interestingly, it didn’t.

Foreign buyers are still active despite closed borders. In fact, in the financial year 2020 foreign investment hit its highest level in three years, surging 15.5% to a total of $17.1 billion.

In fact, the largest number of proposed foreign investment approvals received over all the possible investment categories in FY2020 was within residential real estate, totalling 7,056.

3. Where foreign buyers come from is not where you may think

What’s perhaps even more interesting is the spread of countries that these foreign buyers call home.

While China used to be the number one place of residence for foreign buyers, it’s now just number three on the list. That’s due to border closures and COVID-19, as well as trade and political tensions.

Foreign Investment Review Board data shows the US topped the list when it came to money spent by foreign buyers for the 2020 financial year, followed by Singapore, then China, Germany and Canada. A breakdown by dollar investment reveals:

  • United States: $13.1 billion
  • Singapore: $9.5 billion
  • China: $7.1 billion
  • Germany: $3.7 billion
  • Canada: $3.3 billion

Just three states made up the bulk of the residential real estate approvals, with the most granted in Victoria, followed by NSW, then Queensland.

It’s important to note that only 1,101 approvals were given for established residential dwellings, with 6,000 given for new developments. Reassuringly, the number of compliance investigations has decreased, as has the number of breaches, down from 600 in the 2018 and 2019 financial year, to just 259 breaches in 2020.

According to the Annual Report, most of the breaches happened simply because the buyers didn’t realise they had to apply to the FIRB. But had they applied, chances are they would have been approved.

4. Foreign buyers are likely to remain a force in Sydney’s eastern suburbs

Some of the foreign buyers we assist with eastern suburbs property are looking at the luxury end of the market. Many have a very particular list of requirements such as proximity to a particular school or university; others want a quintessentially Australian lifestyle location, which usually means one that’s close to the beach or harbour.

But by far the largest market of buyers we’re seeing from overseas right now is ex-pats and not foreign investors.

It will be interesting to see what the 2021 financial year report from the FIRB brings. While we may see a dip in ex-pat activity, once borders reopen Australian property is likely to continue to be an attractive prospect for overseas buyers. For that reason, we expect they’ll continue to be a major factor in Sydney’s eastern suburbs, especially in the prestige property market.

And finally…

If you’re thinking about buying or selling in Sydney’s Eastern Suburbs contact my team today. We’re still running at full capacity and carrying out one-on-one property inspections in line with COVID restrictions.

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Eastern Suburbs Market Report

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