If you’re a first homebuyer, you’re probably sick of reading about overseas buyers locking you out of the property market.
When you consider the stats, you have a right to feel threatened. Property prices in Australia are through the roof, with increasing numbers of buyers coming from China. In 2013-14, for example, a quarter of new housing stock in Sydney and Melbourne was snapped up by the Chinese. Both cities rate higher amongst Chinese buyers than New York, London or Tokyo. They’re pumping money into our property market like never before.
And just so that you know what you’re up against, a report released by Credit Suisse earlier in the year claims there are 1.2 million Chinese with more than $US1 million in China who ‘can easily afford to buy an apartment in either Sydney or Melbourne’.
But it’s not all doom and gloom.
Many experts believe that overseas buyers help to make housing more affordable because their investment boosts the economy, provides jobs and encourages new homes to be built, increasing housing supply.
We understand some of you may find this argument difficult to swallow, especially if you’ve been trying to enter the market for some time unsuccessfully. But if you’re continually finding yourself up against foreign buyers, sometimes the best way to compete is to avoid the competition. Revise your strategy and consider buying outside of foreign investment hot spots.
Here are 3 tips to help you:
Choose old over new. Overseas investors are restricted to buying ‘new build’ homes or apartments, so your competition for existing properties is significantly reduced. Buyers from China are mainly interested in brand new houses in estates and new apartments in the city, so it makes sense to consider older properties which you can renovate to suit your style and needs.
Buy on the outskirts of the city. Most foreign investors are interested in ‘inner city’ properties, so why not consider suburbs on the city fringe with easy access to the city? If you do your homework, you should be able to find attractive locations that offer similar facilities to the inner city for a far more reasonable price. Make sure you research public transport and peak traffic conditions if you need regular access to the city.
Buy outside of Sydney and Melbourne. Australia’s two largest cities are the main target for Chinese investment, so consider buying in a different city. If you’re unable to move because of work or other commitments, consider renting and buying an investment property in a regional city like Newcastle or Geelong. If you purchase wisely, you’ll be able to sell at a later date for a profit increasing your deposit to buy closer to home next time around. For those of you new to property investment, read our Beginners’ Guide for some helpful tools and tips.
It’s a frustrating time for first homebuyers. To make it worse, the media is filled with stories about overseas buyers cheating the system to buy property illegally. But the good news is the government is proposing tough new civil and criminal penalties for investors who knowingly break the rules. There will also be a new register to track the origin of foreign investment and if investors breach the rules, they could be hit with up to 25% of the value of the property and forced to sell.
Not only that, a $5000 application fee will be imposed on foreign investors looking to buy a property under $1 million. The fee rises by $10,000 for every additional $1 million in the purchase price.
So hang in there. Things could become slightly more even.
In the meantime, keep your options open and, above all, don’t give up. If you’re finding it impossible to enter the market, you might like to rethink your strategy. Sometimes we have to put our first goal on hold and move on to the next best option, away from our major competitors.
How do you feel about overseas buyers snapping up Australian property?