Foreign investors looking for strong return of investment when purchasing property turn to Australia real estate. With a good and stable economy, there is nothing to lose when you invest in Australia.
For the past decade, Chinese investors have turned to the Land Down Under to purchase property either for personal use or for commercial purposes. They have not looked back ever since. Although the flow of Chinese property investments has slowed down the past couple of years due to currency restrictions from their home country and Australia’s foreign mortgage laws, there is no sign that this flow of investors will stop anytime soon.
Let’s take a closer look at the top reasons why the Chinese are investing in Australia.
Stable Real Estate Market
Australia’s real estate property market has a history of stability. Although sometimes prices would go down, they eventually climb back up once the market has stabilized. Also, with lots of foreigners moving into Australia, and Australia’s own population rising, there is a consistent need for housing. This means the property you purchased can be rented out, allowing you to earn money in the process.
Chinese investors flock to Australia because it has a stable government and economy. The country has no threat of going to war with other countries, nor is there any threat of any civil war. Its government is not too erratic as to heavily influence the value of your property, so if you invest in Australia, you can sleep at night knowing you have invested your money in a country with stable government and economy.
Lending Regulations that Prevent Market Crashes
While many countries focus more in gaining investors and buyers, Australia focuses more on the quality of the lending environment. In fact, Australia has no qualms about limiting investors, in order to make sure that the market and financial system are both stabilized. The Australian Prudential Regulation Authority or APRA supervises financial institutions to minimize the chances of them failing, which can cause a problem in Australia’s financial system as a whole.
For instance, one of APRA’s regulations is to prevent very low mortgage lending to foreign investors. This way, the number of borrowers can be regulated, while the earnings per investment are enough to sustain the market and prevent collapse.
APRA’s regulations have so far prevented the occurrence of asset price bubbles. An asset price bubble is when the price of an asset – whether property, stocks or other forms of investment – rises up so fast that it exceeds the asset’s sustainable value. When the bubble bursts, the market crashes. This can also lead to recession.
But as APRA works closely with the Reserve Bank of Australia, the Australian Treasury and the Australian Securities and Exchange Commission, they are able to prevent instances of asset price bubble. This is the main reason why Australia is enjoying the longest real estate property price “upswing” of 55 years, as stated by the researchers from the Bank for International Settlements in Switzerland.
Over the last century, Australia has had a constant capital growth in terms of real estate. The prices actually double every 10 years. This is due to the perpetual housing shortage in and around the central business districts.
The population is rising in these locations as more and more locals are moving into the major cities. There is also a rise in foreign migration to the country. With this, the demand is still constantly larger than supply.
Ease of Investment
Many countries prevent foreign nationals from owning a property. Some require setting up a company or even buying with a citizen, with a citizen owning more than foreign investor. In Australia, these are all eliminated. You only need to apply for approval at the FIRB and pay the necessary fees to be allowed to purchase a property.
Unlike many comparable developed countries, approximately 70% of Australian properties are purchase by home owners, creating a fertile environment for investor speculation.
Are you looking to purchase a property in Australia and don’t know where to start? Head over to guide on Foreign Investor’s Journey to Property Investment in Australia. If you still need assistance, don’t hesitate to send us a message today.