US investment in Australian residential property is now double that of China with no sign that trend is changing
24 August 2021 | Marcus Reubenstein
The total value of foreign investment in Australian residential property, across the five biggest source countries, has plunged nearly 83 per cent in the past two years. That’s pushed Chinese buyers into a distant third place, well behind the United States and Singapore.
The top five source nations of residential property buyers are the US, Singapore, China, Canada and Hong Kong. Although Australian policymakers have been keen to invite migration and investment out of Hong Kong, investment from that market has dropped by 87.3 per cent since 2017-18.
Singapore has been the big—and quiet—mover with FIRB (Foreign Investment Review Board) data showing investors from the tiny Southeast Asian powerhouse invest one-third more into Australian residential and commercial real estate in the past year than Mainland Chinese investors.
According to property research group, Juwai IQI, “Singaporean investment is weighted towards large-scale investors purchasing commercial property and development sites. Chinese investment is now predominantly individual buyers purchasing residential units.
“Examples of Singaporean investors include Singapore’s sovereign wealth fund GIC, Singapore Press Holdings, and listed Singaporean developers Wing Tai and Wee Hur — all of which acquired significant Australian assets in 2019-2020.”
Singapore’s new ‘backyard’
Says, Juwai IQI chairman, Georg Chmiel, “Australia is like a big backyard for many Singaporeans. Perth is just five hours away by plane, and the east coast cities are also within relatively easy reach. For retirees, second home buyers, families with school and university age children, and property investors, Australia is an obvious destination.
“Singaporean developers are also helping bring their buyers from the Lion City to Australia. One example is luxury boutique developer Jean Yip Holdings. Their Perth project, Elements at Carousel, quickly sold out, and 60% of the units were purchased by buyers from Singapore.
“The pandemic has put a halt to most travel back-and-forth, but it hasn’t choked off real estate investing. That’s why the FIRB report shows Singaporean investment has continue to climb despite Covid.”
US investment trumps the rest
The United States continues to be the dominant foreign player in the Australian economy, Department of Foreign Affairs and Trade (DFAT) data shows total US foreign investment in Australia in 2020 was twelve times greater than Chinese foreign investment.
The total stock of US investment is 23.3 per cent, with the United Kingdom coming in second place at 18.5 per cent. China is in ninth place with just 2 per cent of Australia’s total foreign investment.
The total value of FIRB approved US investments in Australia in the last financial year was just under $50 billion, with the average value of each approved investment being $164 million.
There were $12.7 billion in Chinese investments approved by the FIRB which were overwhelmingly small investments. The average value of each transaction from Chinese investors was just $2.9 million.
FIRB Board reflects old money
In terms of ethnicity and professional experience, the eight members of the FIRB board are far more reflective of Australia’s history than of its trade or geography.
All eight board members are of Anglo or European ethnicity and only one, Chairman David Irvine, has direct professional experience in Asia.
Irvine was Australia’s ambassador to China from 2000 until 2003, who went on to become the boss of Australia’s two main spy agencies, ASIO and ASIS. He was appointed to the chair as the Turnbull government was enacting its foreign interference legislation. Independent news website Crikey reported the announcement as, “Former spook David Irvine appointed to head up FIRB: Irvine has no business or financial experience of any kind.”
Among other board members are two former politicians, Nick Minchin (Federal Liberal Government Minister) and Cheryl Edwardes (WA Liberal Government Minister). Other board members are former Deputy Ambassador to the United States, Meg McDonald, former Rio Tinto boss David Peever, ex-Deloitte tax adviser, Teresa Dyson and Vice Chairman of Deutsche Bank Steven Skala.
The Chinese investor narrative and data don’t match up
A recent survey by the UTS (University of Technology Sydney) Australia China Relations Institute and the university’s Centre for Business Intelligence & Data Analytics, shows public perceptions more closely align with the media narrative on China, not the reality of the data.
Co-authored by Elena Collinson and Dr. Paul Burke, the report found, “A clear majority of Australians (82 per cent) say that ‘Foreign buyers from China drive up Australian housing prices’.
“Approximately seven in 10 Australians (69 per cent) say ‘Chinese investors in Australian real estate have made it difficult for first home buyers in Australia to enter the market’ and that ‘Chinese investors have negatively affected the rental market for residential real estate in Australia’ (69 per cent).
“The majority of Australians (78 per cent) believe ‘Australia should restrict the amount of investment in residential real estate that is permitted from Chinese investors’.”
Says, leading property economist, Dr Andrew Wilson of My Housing Market, “The residential property market is not being driven by foreign investors from China or anywhere else, it’s local activity.”
According to Wilson there have been a lot of stops and starts in the local residential market, with the latest series of COVID19 lockdowns again slowing down the number of properties coming on to the market and the number of buyers.
“If you look at the residential property returns over the past four years across Australia’s capital cities, prices are up around four per cent. A lot of the activity we have seen this year has been catch up from periods of flat activity,” he says.
When prices dipped in 2019, sections of the media, a handful of economists and some property market commentators warned Australia was headed for a 30 per cent crash in market price. At the time, Wilson dismissed those predictions as false and alarmist; he was proved correct in his assessment.