Cashed up foreigners pricing the young out of the property market

A few tidbits from the Foreign Investment Review Board's 2012-13 annual report:

- Total foreign investment in residential property in Australia fell in 2012-13, from $19.70 billion to $17.16 billion. That was because of a substantial fall in off-the-plan purchases (from $10.9b to $5.7b). Purchases of existing dwelling stock increased to $5.4 billion (it had fallen in 2011-12), and purchases of vacant land had more than doubled to $1.4 billion.

- Victoria and New South Wales dominate as destinations for foreign investment in residential property, garnering around $5.8 billion and $5.6 billion respectively.

- Foreign residential real estate investment skews toward new dwelling construction: in 2012-13, despite the fall-off in off-the-plan purchasing, $8.64 billion in foreign investment was for new dwellings, with a further $2 billion for other development, while investment in existing dwellings was $6.4 billion. The predominance of new dwelling investment in foreign residential investment is dramatically at odds with the rest of the market, where new dwelling investment is a fraction of housing finance.

Who's buying?:
- Chinese investors bought $5.93 billion in commercial and residential real estate. I can't find numbers for just residential by country of origin but at $34.75 billion, the value of commercial real estate purchases was twice as large a target for foreign investment as residential real estate.
- Canadian investors bought just under $4.93 billion
- United States investors bought $4.41 billion.
- Singapore = $2 billion
- UK = $1.67 billion
- Malaysia = $1.6 billion

So even xenophobically lumping all Asians into being "Chinese" buyers (sorry guys), there were actually more real estate investors from English speaking anglo countries (not including the Kiwis). Oh no, white English speaking foreigners are driving up real estate prices! :O

- According to the ABS (cat no. 5609.0) the value of residential housing finance commitment (excluding refinance) for new and established houses in 2012-13 was $122 billion. So, at most, we're talking about foreigners buying 9% of all new and marketed properties. So 91%+ are Australians buying Australian property (by value).

Keep in mind that a portion of these purchases will be for people who have temporarily migrated to Australia for work (eg Exxon Mobil employees from Houston involved in gaining approvals and undertaking FEED for, say, the development of the Scarborough gas field).


Edit: Actually it should also be noted that this data is just for the FIRB approvals to invest, not the actual amount invested. A good example is a foreign buyer gaining approval to participate in an auction (up to the approved value) but then failing. The failures are included in the above totals.

 

You mean more money is invested in Australian RE by white people than the Chinese? God dammit this is just like the illegal immigrants thing all over again. I hate it when people ignore the emotional issues of having your country overrun by brown or squinty eyed people and just use statistics to prove it to be bull shit

 

I don't know where you are getting your incorrect information from... I am not trying to be glib, I am simply being realistic - Societies evolve and change. Being frightened and angry at things beyond your control rarely changes them and opens you to frustration and suffering. I am merely suggesting that success lies in accepting and adapting to new paradigms and finding the opportunities contained within. The Chinese moving here are people too with hopes, dreams, love of their families and nervousness about being accepted in a new society that they have no experience with. They are simply migrant families with all of the hopes and insecurities of any such family anywhere in the world. By extending acceptance and friendship and support to these families you show yourself to be decent and without fear, and I have no doubt that the Australians that offer their friendship and support to them will be offered a unique opportunity for creating social and business partnerships based on mutual respect and trust that could be found nowhere else.

Just because these families may be wealthy does not mean that they aren't also vulnerable and nervous and hopeful of finding acceptance in a new country for themselves and their children.

 

I wonder how many older people (in Sydney anyway) realize that when they say "buy somewhere you can afford", back when they were looking for affordable houses they were looking at sh**holes like Paddington, Balmain and Glebe.

It's certainly a fair point to make about budgeting, but if you're going to keep flipping houses backwards and forwards to speculators for ever increasing millions, you also lose the right to bitch about takeaway sandwiches that cost $15. The person that made that sandwich needs $400/week just to pay for a roof over their head somewhere within two hours of where they work.

There are a lot of older people planning on living in their million dollar inner city homes until they die and I fear that they could be in for a rude shock when the full effects of the house price inflation they cheered on comes back to bite them.

 

alot of investers are going to lose alot of money when the crash comes.
advise to hopeful house buyers.
wait
for half price houses..

 

Totally agree with you. In the face of this, "buy something you can afford" (in a s**t hole if necessary) still seems to be the best advice , even after all this time.

 

Hopefully it won't be that bad, but more than ever I think that to buy property it's critical to go for something that is at it's "real" value so that if there is a crash you won't lose much. I have been looking at 3 BR houses in parts of the Southern Highlands that are around the $350,000.00 mark as a good investment - even in a crash they can't drop much. A 2 BR flat in central Sydney for $700,000.00 on the other hand could loose a LOT if there is a bubble and it pops. I can't see a housing crash though unless some really serious black swan event occurs. Who knows, it's anyone's guess.

 

Well, I don't disagree, but saying that is also a bit redundant, isn't it? By definition, people can't buy where they can't afford, so they buy where they can.

The sage advice being given by older people to younger people basically boils down to "Go far, far away from the cities where there is virtually no infrastructure or amenities, buy a very expensive plot of land and the cheapest, nastiest new-build you can put up with using borrowed money, then spend the next 30 years paying off the bank by eating ramen noodles to save cash and spend 4 hours a day in traffic to get to your job on the other side of town. Oh, and don't you dare think about buying a new gadget because anyone with an iPhone clearly has an entitlement mentality and isn't trying hard enough to own their own home".

...and the young people look around, realize that the only reason homes are so expensive is because the market is rigged to favor incumbent owners by pushing prices higher and they say "F**k that, I'll rent somewhere I like, bitch about the price and demand $25/hour to make lattes and if you don't like it then you can move somewhere cheaper."

The title of this thread could easily be changed to "Profiteering boomers pricing the young out of the property market" and it wouldn't really be less accurate.

 

But that is the issue really, nobody knows what true value is in a manipulated market and the ripple effects through the primary, secondary, tertiary, etc real estate markets of artificial stimulus floating house prices higher, will play out in reverse should that stimulus be removed.

However, a government dependent on extracting economic rent from financial transactions will do everything it can to keep the financialised real estate market afloat, without pausing at the social implications. And I have pointed to the ring fencing of sub-prime CDO's (RMBS) at the RBA via its CLF and repo arrangements as one of the bazookas that is being put in place to contain any sub-prime mortgage volatility from instigating a waterfall price drop. This is effectively a perpetual bail-in of the Australian taxpayer on any sub-prime failure in the RMBS market.

So, regardless of any ideological differences assumed between a sino-communist, multi-generational princeling led state playing for global control and the hoped for liberal democratic values of the Australian people (misunderstood as xenophobia), you can count on the Australian government's commitment to being an economic rent collector, dependant on erecting virtual toll gates on financialised markets, to guarantee house price growth regardless of societal or ideological consequences.

 

This should be in the RE section....

Anyways I believe that the Chinese are corrupt/shifty with their money and are investing in other countries trying to find places to store there wealth if not as an investment but a place of full land/biulding ownership.

Its the governments allowing this international investment to happen and it is forcing the locals out of town.

 

Well in new inner city suburbs in Sydney this defiantly is not the case, being "nervous and hopeful of finding acceptance in a new country".

They come here in packs, don't bother to learn our language and ways. Then they start putting grocery shops up where no one speaks english, there are no english signs and sell no locally known foods.
80% of people in the new inner city suburbs are asian so for them its just like being back in Asia, so they see no need to adapt. It is the white people that feel "nervous and hopeful of finding acceptance in these new suburb".

Oh and before you think I'm just some anti asian person, ill like to point out my partner is asian. She also finds a lot of them to be very arrogant. She often gets random Chinese people start talking to her in their language, they just assume everyone is like them.

So to say they are all trying hard to find acceptance is utter crap, mainly the new ones that come here with money. Most of them act as if they own this country! Well i guess they do, but... :/

At the end of the day they are not going to try and adapt and find acceptance any more then when the white man first made his way to this land. Due to their numbers and power they don't need to find acceptance, they will force us to accept them.

 

Where are you talking about? Sydney hasn't had a new inner city suburb in over 50 years, there are no empty land parcels in the inner city to build new suburbs. Unless you mean the industrial areas that are being gentrified like Pyrmont and Alexandria? When you say "they come here in packs" what part of inner city Sydney are you talking about? I don't know of any part of the inner city that is full of Chinese grocery shops where no-one speaks english and the food is un-identifiable.

 

Zetland, which is 10min from the city. Almost the entire suburb is new apartment buildings, it's a very small suburb.

Look I'm not saying they are bad, I'm just saying they are by no means doing anything to adapt and finding acceptance.

 

I know it, Shoddy high rises mostly built by a company that I won't name that are going to lose value as they crumble.

 

HAHA yea that's it, we rent there. After watching them build these building, there is no way i would ever buy one! In 10 year they will all start falling apart. Our building is less then 2 years old and is already having issues.

Also the workers spend more time looking at girls and telling fart jokes then working. The incompetence of most workers is shocking! i wouldn't trust them flipping a burger let alone build a building.

 

It's a downward spiral for investors - The buildings look nice when they are new, but quickly begin disintegrating. Owners who borrowed lots to buy them as investment properties don't have the cash to renovate them after a few years when the fittings and finishes start to peel up, and even if they do they can't do anything about the increasingly poor condition of the common areas. Owner-occupiers are in the same boat. This eventually leads to a downward spiral in terms of tenants and rents as the building becomes shabby. I have wondered for a while if that area will become a slum some day simply due to the state of the buildings and the cost of maintaining them.

 

Im renting in a large block of units in inner Sydney built about 5 years ago and they are already starting to have major issues. A warning to anyone thinking of buying in one of these mega-blocks... don't.

 

Yes i often think this too. Its one of the highest population dense living areas in Sydney and when the buildings start degrading things can get very bad there. All i know is that in 10 years time i would not what to be anywhere near that area.

Lucky ill be gone far before then.

Got to be one of the worst investments around. Not only are they over valued, but once you also include strata and maintenance its a real sinkhole.

 

It's not just investor demand

In the half price scenario, the reasons narrow, including widespread job loss, or at least uncertainty, interest rates, bank loan risk reduction, economic or safety driven migration, liquidation by an ageing population, market psychology, capacity to pay, expectations of making money or at least breaking even and other factors tilted financial priority

If a crash comes, there are bigger losers than Australia.

China will likely do what it can to prevent it from happening. There are lots of Chinese that remember the hard times.