Foreign buying activity in the Australian residential property market has soared over the September quarter this year – accounting for 1 in 6 new properties nationally.
Residential Property Index remained unchanged overall at +19 points in Q3, as stronger house price expectations were offset by weaker rental prospects. But the big story was the significant pick up on foreign buying activity in new property markets across the country.
Group Chief Economist Alan Oster said, “Foreign buyers accounted for 16.8% of total demand for new property in Q3, or about 1 in 6 of all buyers, with this share tipped to rise to 17.3% over the next year. Foreign buyers were more active in all states, but especially in Victoria where they accounted for an estimated 24.8% of total demand, or 1 in 4 all new property sales.”
Foreign buyers were less active in the established property market over Q3, with their share of total national demand rising to 8.2% (7.2% in Q2). Foreign buyer demand for established property increased in all states except NSW. VIC again led the way, with foreigners accounting for a record high 11.5% of established property demand.
Local investment in new property fell to 27% of national demand over Q3 (32.5% in Q2), accounting for a smaller share of demand in all states. Their share in established dwellings remained broadly unchanged over the quarter at 25%, being most active in the QLD, NSW and VIC established property markets.
First home buyer demand fell again over the quarter, making up 16.4% of the established property market (18.5% in Q2). First home buying activity fell most sharply in VIC, dropping to 15% (22.5% in Q2).
The survey identified housing affordability as the biggest constraint on new housing developments in the country, while employment security continued to be the biggest impediment to buying an established home.
“This was not surprising given recent strong house price growth and rising trend unemployment,” Oster said.
Economics’ analysis of the market suggests that house price increases will be more modest than in recent times because of rising unemployment, sluggish household income growth, affordability issues and cost of living pressures.
“We are forecasting average house price growth of around 4% through the year to September 2015 and 2% through the year to September 2016”, Oster said.
“Brisbane and Sydney are expected to lead the market in the next year, followed by Melbourne and Adelaide, with Perth lagging”.