07.26.2017 Property Trends

The (Real) Effects Of Overseas Buyers On Sydney’s East

The (Real) Effects Of Overseas Buyers On Sydney’s East

Eastern suburbs property has attracted overseas interest for some time, particularly in the harbourside areas running from Elizabeth Bay up to Watsons Bay.

But the common story that foreign buyers are crowding out local property hunters doesn’t represent the full picture.

Here’s a closer look at how overseas investors and other foreign buyers really operate in Sydney’s east and what effect – if any – they have on property prices.

Who are our overseas buyers?

As with any regularly reported property trend, a closer look at this aspect of the market reveals a multi-layered picture. Overseas buyers come from a whole range of demographics, including:

  • Expats: Australian citizens buying property in Sydney while based overseas.
  • Investors: Foreign nationals who see Australian property as a secure investment option.
  • Dual citizens: Buyers holding Australian and other citizenship who may be looking to rent out or move into their purchased property.

Overseas buyers don’t just represent one demographic or come from one region. Interest comes from across Asia, Europe and other parts of the world.

How many foreign buyers are looking in the east?

A recent report by the Foreign Investment Review Board suggests 64% of Sydneysiders believe foreign investors are driving up house prices, but this doesn’t square with the activity on the ground. The report also showed foreign demand only accounts for $122 of the $12,800 quarterly rise in Sydney house prices.

These figures match our own observations while working with sellers in Sydney’s east. In the first six months of 2017, just three buyers who purchased property from us were from overseas. Of these, only one was a true foreign buyer – the others were Australian expats returning from overseas.

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What are foreign buyers looking for?

The vast majority of overseas buyers looking at eastern suburbs property have one focus in mind: the ultra high end of the market. That said, this interest in Australia’s blue chip real estate doesn’t always result in a signed contract. Most of our recent top end sales have actually been to local buyers.

When we do see interest from overseas buyers, they often have a particular list of requirements for each area. Proximity to education providers like UNSW brings them to Randwick and surrounds, while closer to the harbour and CBD they’re looking for the ultimate mix of views, location and lifestyle.

Will new tax rules slow overseas investment?

The 2017-18 federal budget held a number of warnings for investors overall, who are now facing a vacancy charge, less flexibility in terms of expense claims and no exemption from the main residence Capital Gains Tax. Now that the NSW government is planning to double the tax for foreign buyers, we could see less interest in Sydney overall, even if the east maintains its hold over buyers.

While the effects of foreign buyers in Sydney’s east can’t be discounted entirely, they aren’t having the dramatic impact that is sometimes reported. The true real estate landscape for both foreign and local buyers will always depend on the factors that are particular to each market.

For expert advice on understanding how these markets truly operate, contact our team.