Australia

SINCE the mid-2000s, Australia has seen low interest rates, an abundance of liquidity and strong population growth, underpinned by high levels of immigration. This has led to an increase in demand for real estate that exceeds the supply of new properties, says Ian Chen, founder, owner and group CEO of Jalin Realty International.

According to him, the median house price in Australia has grown as high as 15% per annum. “However, property prices stabilised towards the end of last year after banks tightened their lending and the Australian government implemented new regulations to curb property speculation.”

Foreign appetite for real estate in the country has surged in the past year, with the value of proposed investment rising more than 75%. Chen says, according to the Foreign Investment Review Board (FIRB), total foreign investment in real estate between 2014 and 2015 was A$97 billion (about RM287.8 billion). The largest contribution came from China (A$24.3 billion) while Malaysia was fourth largest with A$3.4 billion.

Chen reveals that Sydney, Melbourne and Brisbane remain the most popular destinations for foreign investors.

“The Australian market has enjoyed consistent capital growth over the last 100 years, with property prices doubling in 7 to 10 years. The low vacancy rate of 2% to 3% for landed and non-landed properties in certain cities has made Australian property an attractive investment proposition,” he says. “With a current borrowing rate of around 5% and yields of between 4% and 5% for residential properties, investors can achieve neutral to positive cash flow with a 70% loan-to-value ratio.”

Still, there are certain things that foreign investors need to consider. “Foreign buyers in Australia are only permitted to buy new dwellings or off-the-plan properties with FIRB approval,” Chen says, adding that non-residents have to pay an additional stamp duty of 3% from July 1, 2015, and an absentee land tax of 0.5%.

“In addition, an FIRB application fee of A$5,000 is applicable for properties valued at up to A$1 million, A$10,000 for properties below A$2 million and A$20,000 for properties below A$3 million. These measures are meant to prevent property prices from growing too rapidly.”

Moving forward, Chen says home prices in the country are expected to see low single-digit growth.

“Melbourne is currently leading the market in price growth, while Perth and Darwin are experiencing declines. Sydney — which had experienced a boom in the past three years — recorded a fall in the median price. In the past six months to January, house price growth in Melbourne (+3%) exceeded Sydney’s (-1.1%),” he remarks.

“Mortgage rates for residential properties are likely to stay around the same level, at around 5%. Rental vacancy rates are increasing, with certain cities seeing rates of 3% to 4% due to a consistent supply of stocks. Rents have seen a slight fall in 2016.”

Chen will share more insights on the Australian real estate market at his talk “Investing in properties Down Under: Have you missed the boat?” at The Edge Investment Forum on Real Estate 2016 at Sunway Putra Hotel in Kuala Lumpur on April 30. The forum’s theme is “Riding out the storm: Pitfalls to avoid”.

Do not ask your uncle about the value of your home. Click here at The Edge Reference Price to find out.

This story first appeared in TheEdgeProperty.com pullout on April 15, 2016, which comes with The Edge Financial Daily every Friday. Download TheEdgeProperty.com here for free.

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