Investing in Australian property from overseas

Foreign investors have about AU$4 trillion invested in Australia’s economy, with a significant portion dedicated to Australian real estate. The land down under is seen as a haven for thousands of overseas investors looking for secure and rewarding opportunities, with a strong track record of performance outweighing many investment alternatives in other countries.

COVID-19 has tightened many foreign investors’ pockets in the last two years. But with Australia’s borders reopening and its restrictions loosening, the experts forecast a significant injection of overseas capital in 2022 and 2023. Here’s why.

Why foreign investors choose Australian real estate

History of strong returns

Foreign investors already own a huge portion of Australian real estate. That’s because it’s not only easy to invest in Aussie property – it’s proven to be incredibly rewarding

According to real estate group Knight Frank, houses and apartments across major Australian cities have recorded an average 6.8 per cent and 21.9 per cent capital growth year-on-year respectively (as at April 2022). Capital growth is a huge reason many overseas investors partake in Australian residential and commercial assets.

Transparency

Australia has been voted one the most transparent real estate markets in the world as part of the Global Real Estate Transparency Index.

The index ranks 99 countries and 163 cities globally, and 2020 saw Australia voted the world’s third most transparent property market. It cited Australia’s investment performance, market fundamentals, regulatory environment, and sustainability transparency as the globe’s best.

Which countries invest in Australia?

Australia is a melting pot of culture, with its national identity a diverse mixture of ethnicities. The same can be said for investors in its property market.

The below outlines our top foreign investment sources, including direct and portfolio investments.

United States | 23.3% of total investment

Unsurprisingly, the US dominates the foreign investment market in Australia – as it does across the globe (ranking number one for total overseas investment around the world).

United Kingdom | 18.5%

The UK places second for total investment into Australia’s economy. A large contributing factor is the ease of relocation for English expats. Australia is proudly home to hundreds of thousands of Englishmen and women who hold either visas, permanent residency, or Australian passports.

Our similar culture of course provides considerable comfort for those in the UK looking for a high-quality overseas investment that competes against offerings on their home soil.

Japan | 6.6%

Japan has been a major commerce partner of Australia’s for over 65 years, when the two countries forged the 1957 Agreement of Commerce. The agreement noted Australian-Japanese shared values and common approaches as the pillars of investment, and foreign direct investment has skyrocketed in the many decades since.

Japan is very familiar with Australia’s turf, with well over 500 Japanese firms and subsidiaries operating here.

China & Hong Kong | 5.5%

China, our largest trading partner, ranks as one of our biggest sources of foreign investment.

But it might surprise some that China’s investment total is not far higher. As at 2020, Luxembourg invested more in Australia than China (excluding Hong Kong). But China’s domination in the investment market lies in its growth in annual investment, which has increased significantly in the last decade.

Singapore | 2.9%

Singaporeans have long invested in Australian real estate. Knight Frank Australia recently noted that it’s the high likelihood of capital appreciation that attracts so many Singaporeans to Australia’s property market – and will continue to do so well into the future.

What types of investments can overseas investors partake in?

Foreign investors have a range of investment options available to them, as long as they adhere to the guidance set out by the Foreign Investment Review Board (FIRB).

For residential property investment in Australia, non-residents can invest in new and pre-construction residential development. Buying established houses is not allowed.

Foreign investors can also apply for finance to purchase Australian real estate. Many Australian banks and non-bank lenders will consider providing loans to non-residents, providing of course their lending criteria is met.

The commercial real estate investment market sees an abundance of foreign buyers too. And why wouldn’t it? Commercial real estate, with assets like industrial property, retail property, and offices, offers considerably higher yields than residential real estate, with typical annual returns reaching between 5 per cent and 7 per cent (and sometimes far higher).

The overseas investor market consists mostly of foreign companies and investment groups but that doesn’t mean private investors can’t partake.

Investing in Australian commercial property through a syndicate

Property syndicates are a common method of investment for overseas property buyers. Investors pool their capital with other likeminded investors and are thus able to acquire far larger real estate assets than they otherwise would if investing alone.

The benefit of investing in a commercial property syndicate extends to its simplicity. Investors can place their funds with the syndicate’s fund manager, leaving the hard work to the professionals. There’s no due diligence, no market research, no property management, and no major investment or divestment decisions left up to the individual investor. That’s all taken care of.

Property syndicates offer a set and forget investment: While you’re sleeping, while you’re holidaying, while you’re on the golf course, your investment will be working for you.

Are you a foreign investor? Are you interested in investing in Australian commercial real estate?

Then get in touch today. For almost a decade, Properties & Pathways has offered foreign investors and non-residents the chance to partake in high-quality commercial property investment. We value trust and transparency, and we invest alongside each investor in every property investment. It’s why we’re considered one of Australia’s most trustworthy property investment companies.