Why a negative focus on foreign investors is wrong

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Worried about the “threat” of foreign residential investment and its impact on the market? Property industry professionals reckon you shouldn’t be.

In fact, ongoing negative coverage of foreign residential investment is a beat up and needs to be counteracted with a reality check, according to the REIA.

In her recent submission to the Inquiry into Foreign Investment in Residential Real Estate, REIA CEO Amanda Lynch said the organisation believes that foreign investment is beneficial and adds to the supply of housing.

The focus on Chinese investment in particular was a beat up, she said. In reality, Chinese investment in all real estate amounted to just 11.4% of the total, followed by the US at 9.5% and Canada at 8.5%.

Lynch emphasised that there was insufficient evidence to come to a definitive conclusion on the level of competition between foreign buyers and first home buyers in particular markets.

“On the aggregate data available we see that the mean price that foreign investors pay is at a level higher than the average first home buyers would pay.”

Further, FHBs have a marked preference for buying established real estate while foreign investors tend to purchase new apartments and can only buy established houses if they are temporary residents.

Foreign investors buy at a much higher level of the market than aspiring HBs, Lynch said.

“There is a $1 million average for established real estate for temporary residents and $647,000 for new dwellings, which compares with the current median price of $606,517 for houses and $483,320 for units.”

Foreign investment also adds to the supply of rental property, which was crucial given the national undersupply of housing, Lynch continued.

“Vacancy rates and rents would be higher without foreign investment. Without foreign investment, many building projects would simply not be viable.”

The REIA’s views, which are supported by other industry professionals as YIP has reported in the past, run counter to recent scaremongering on the issue.

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