Savvy foreign investors have been buying up properties on Australian shores for some time now, and this trend is continuing in 2012 despite the high-rating Aussie dollar. 

The Foreign Investment Review Board's (FIRB) annual report states that overseas property investment amounted to $34.6 billion, a twenty-three per cent share of the total foreign investment for the last financial year.

Investment in residential properties made up $20.9 billion, a considerable increase from the two years prior, coinciding with changes in investment review guidelines. Foreign investors also poured another $6.9 billion into the development of residential properties around the country.

FIRB requirements

The FIRB changed foreign investment requirements as of 24 April 2010 (changing the exemptions in place since April 2009), no longer making temporary residents residing in Australia exempt from notification of proposed acquisitions of established residential real estate, established residential real estate for redevelopment, and new residential real estate and vacant residential land.

The changes were introduced with the goal of ensuring that investment in Australian real estate by temporary residents and foreign non-residents meets community expectations and doesn't place pressure on housing availability for Australians while meeting the law. The changes mean that all temporary residents and foreign non-residents seeking to invest in Australian real estate will be within the notification, screening and approval process.

While applications from individuals are normally approved without conditions, developers are allowed to only sell around half of their projects to foreign buyers, meaning the dwellings cannot be marketed exclusively overseas except for off-the-plan dwellings, which have become highly attractive for overseas investors.

Top investing nations

Sharing over one third of the overall foreign property investment in Australia are the top three investing nations: the UK with $4.61 billion, China in second place with $4.093 billion, followed by the US, which invested $3.4 billion last year. Malaysian investors spent $1.86 billion, followed closely by the Netherlands, Germany and the United Arab Emirates.

China is the strongest growing investor, having purchased over $60 billion in Australian real estate since 2007. They are also Australia's highest-spending tourist nation on luxury goods, holiday accommodation and travel. According to the Australia-China Business Council, Chinese trade and investment in 2010 generated $10,000 in income per Australian household – a considerable contribution to the Australian economy.

Leading apartment developer Meriton claims that two years ago Chinese investors made up 60% of the buyers in some of their developments. Underlying this growth is the fact that investment properties in China require extremely high deposits of up to 60% of purchase price, making investing in Australia rather attractive.

Chinese investors have historically favoured buying one and two bedroom apartments in cities like Sydney, Melbourne and Brisbane, where their children can attend top universities, and rentals realise a good return.

State breakdown

Victoria took the lion's share in existing property purchases by foreigners of $1.32 billion, with development investment of $7.98 billion in the garden state. With 16,092 multi-unit approvals for Melbourne in the twelve months prior to March 2012, the Victorian city is still the most active unit developing city around the country, despite a drop of 27.3% from the year before.

The state of NSW received $4.24 billion in foreign development investment with some 13,145 approvals for Sydney, a decline of 8.1%, while Queensland at $2.18 billion gave 6,356 applications the tick for Brisbane – all well ahead of the other states and capital cities.

While Sydney holds the highest city population with 4,627,345, a growth of 1.3% for the year, Melbourne’s numbers have increased by 1.6% to 4,137,432, with Brisbane sitting in third place at 2,074,222, a boost of 1.7% from the year before.

When it comes to median prices, both Sydney and Melbourne recorded modest growth of 1.1% and 0.2% respectively, with Brisbane's median precises slumping by -4% for the year until April 2012. Purchases (nationally) of new units for April 2012 however, have increased by 10.3% from the month before, but are 8.8% lower than the year prior.

Investment outlook

Property finance expert Robert Projeski, MD of Australian Mortgage Options said, "With the recent interest rate cuts and more development under way, we are likely to also see more activity from Australian buyers over the second half of 2012. In terms of residential foreign investment, this only fuels further development, reduces housing shortage and ultimately stimulates both, the construction sector and the real estate industry."

Projeski did express some concerns about the need to closely regulate foreign investment. However he sees the $34.6 billion of foreign investment in real estate during 2010/2011 as a positive. "I also see foreign investors buying offices, retail spaces and developments as a benefit, as these investments improve our infrastructure, secure jobs and inject foreign currency into our economy," Projeski said.

With no signs of slowing, it seems that Australia can expect a lot more investment from abroad in the years ahead.

Resource:http://www.stratacommunity.org.au/featured-articles/foreign-investment-australias-property-market