Why do foreign buyers continue to buy Sydney property?
According to a new survey conducted by Urbis, foreign buyers continue to make up a significant proportion of property sales, especially in Sydney.
In the second quarter to June 2016, foreign buyers accounted for almost two-thirds of Sydney’s sales, increasing from quarter one. So why do foreign buyers continue to buy Sydney property?
One of the reasons for the increase in foreign buyers purchasing Sydney property is to do with more welcoming developers who have greater connections.
Urbis Associate Director of Property Economics and Research Alex Stuart says, “The survey included a higher proportion of developers with strong international channels”.
He continued, “Nevertheless, it highlights the continued demand from Asian buyers for Sydney apartments.”
During 2014-15 there were 36,841 residential real estate proposals approved, compared to 23,428 in the 2013-14 period, with a large proportion of these approvals from China, followed by United States and Singapore, according to the Foreign Investment Review Board (FIRB).
Proposed investment in residential real estate increased from $34.7 billion in 2013-14 to $60.8 billion in 2014-15 – almost double.
Owner occupiers account for less than 20 per cent
The survey shows that local owner-occupiers only accounted for less than 20 per cent of property sales in Sydney during this time period, and it has been argued by many that foreign buyers are to blame for Sydney’s housing affordability crisis, due to foreign buyers pushing up property prices. However, there are a number of reasons causing rising property prices including more competition, increasing land costs, lower interest rates and more investor activity.
Urbis surveyed almost 40 projects actively selling in the June quarter and data was recorded on 1,073 sales, an increase from 790 sales in the March quarter. 422 of these sales were in Sydney Central, 240 sales in Central South and 133 sales occurred within the Lower North Shore, followed by the Parramatta region with 109 sales.
Even though new apartment launches declined by approximately 19 per cent in quarter two, activity is projected to increase with more than 20 projects launching in the September quarter. This will comprise roughly 4,000 new units.
With the banks tightening their lending regulations to foreign investors over the last six months and higher stamp duty fees (4 per cent) alongside an additional 0.75 per cent on annual land tax from January 2017, Sydney is still seen as an attractive place to buy property. There are many reasons for this. Here are five reasons why foreign buyers are continuing to buy Sydney property.
5 reasons why Sydney is attracting foreign buyers
1) Infrastructure investment Sydney has a number of major infrastructure investments in progress or in planning. These include Sydney’s new Light Rail, Second Harbour Rail Crossing, North West Rail, WestConnex and the new Western Sydney Airport at Badgerys Creek. Not only will these new major infrastructure investments attract more foreign buyers to buy property in Sydney, it will also create thousands of new jobs, as well as helping to improve Sydney’s liveability and connectivity.
2) Position as a global city Sydney is seen as a global contender on the world market, alongside New York City, London and Singapore and is one of the most multicultural cities. It is also Australia’s global city and a gateway to Asia, as well as being the destination of choice for international corporations, business leaders, tourists and students. Approximately 40 per cent of the top 500 Australian corporations have headquarters in Sydney.
3) Increasing population Sydney is Australia’s largest capital city with a population of almost 5 million. It is expected that Sydney’s population will increase by more than 2.1 million people over the next two decades. This means that Sydney will require another 726,000 new dwellings by 2036 to cater for this rapidly rising population.
4) Strong economy Sydney is seen as a transparent secure market, with some of the highest yields in the world, making it an attractive place to invest in for foreign buyers and local buyers alike. Sydney is well connected and is Australia’s financial and economic hub, being home to the Australian Stock Exchange and the Futures Exchange. Other key industries include professional, health care, construction and manufacturing, particularly helped by the high demand for housing.
5) Low interest rates With interest rates in Australia at an all-time low of 1.50 per cent, this could drive down the Aussie dollar further, making property more appealing to foreign buyers. This means that a lower dollar could ameliorate the impact the new stamp duty fees and land tax could have on foreign buyers purchasing property in Sydney and throughout Australia.
The Sydney Apartment Essentials report from Urbis for quarter two shows that two-bedroom, two-bathroom apartments are still the most popular apartment type. This reflects affordability constraints within the Sydney housing market, with property buyers looking at apartment living as an alternative as they are generally more affordable than houses.
Because of the housing affordability issue in Sydney, two bedroom apartments are also starting to be seen as the more accepted housing choice for young families.
Sydney apartments recorded a weighted average sale price of $1,150,266, which is a $212,861 increase from the previous quarter. It’s important to bear in mind that Darling Square by Lendlease in the Sydney Central precinct contributed nearly 400 apartments.
Looking to the future supply, Urbis is tracking 257 projects, of which 32,979 apartments are in approval and application stage.
To find out more about the impact foreign buyers are having on Sydney’s property market or to learn what Sydney apartments are currently available to buy, why not get in touch with the professional team at iBuyNew. Our expert and friendly Property Consultants will be able to assist you further with your Sydney property enquiries.
Call us today on 1300 123 463.
Published on 26th of October 2016 by Marty Stanowich