Property Market Information: Foreign investment discussion

By the resi financial blog team, 27 June 2014

Foreign investment in property in Australia

Reserve Bank of Australia Assistant Governor (Economic) Christopher Kent delivered a statement to the house of representatives standing committee on June 27 as part of the Economics Inquiry into Foreign Investment in Residential Real Estate.

Individuals seeking the cheapest fixed or variable home loans available in order to secure property may be interested by the review, and Mr Kent's comments.

Foreign investment in residential has been a hot topic in the media lately, particularly in light of many home buyers struggling to secure their first property. 

However, rampant demand for dwellings in cities such as Sydney and Perth can't necessarily be put down to foreign investment, Mr Kent explained.

Furthermore, other factors are leading to competitive property markets, such as low interest rates - a key element that was recently noted in BIS Shrapnel's Residential Property Prospects, 2014 to 2017 report, released on June 23. In fact, today's variable home loan rates are the best seen in over 40 years, with the exception of emergency low interest rates during the global financial crisis.

Mr Kent told the standing committee that a key, yet complex issue, was "whether foreign residential investment has increased the demand for Australian housing by more than it has increased supply, and hence whether it has led to an increase in housing prices, especially for first home buyers".

Citing Foreign Investment Review Board figures, Mr Kent noted that foreign purchase approvals have been a relatively low proportion of national housing turning, with the value of such approvals roughly 5 to 10 per cent of the value of Australia's national housing turnover.

"Foreign demand for housing has supported the local construction industry, while foreign-based developers provide access to alternative sources of financing and add a degree of competition to the sector," Mr Kent said.

However, rising house prices have squeezed some buyers out of the market, with Mr Kent acknowledging that a response to demand is not instant, given the time it takes to plan and build new dwellings.

Categories: Home Loans, Property Investment