REAL ESTATE HAS TRADITIONALLY BEEN SEEN AS A LOCAL BUSINESS BUT INCREASINGLY WE ARE SOURCING FUNDING , MATERIALS AND EVEN BUYERS FROM OVERSEAS.
In WA, whilst we have had massive foreign investment into mining, we lag behind in real estate investment. The Foreign Investment Review Board identified that Western Australia attracted just 5.4 per cent of all proposed foreign investment in new dwellings and vacant land in 2010/11. According to the Foreign Investment Review Board’s latest annual report, $920m was proposed for investment in Western Australia’s ‘for development’ residential sector compared to $17.15b nationally. Victoria was the largest recipient with nearly $8b of foreign funds, followed by New South Wales with $4.2b and Queensland with $2.2b. Nationally, developer ‘off the plan’ purchases accounted for nearly 50 per cent of all foreign residential proposed investment in Australia during 2010/11.
One of the reasons put forward for the increasing globalisation of real estate is the rise of the internet. It is now relatively simple to identify properties in markets outside of the local region that may be a good investment. Defence Housing Australia used technology effectively to break down state barriers for investors and now manages over 10,000 residences around Australia which are owned by private investors and leased back.
Australia has become a safe haven for foreign residential development due to a strong and growing economy with low sovereign risk. Property investors in Hong Kong and Singapore have been buying international property for some time and they are being joined by the increasingly affluent Chinese middle class where local policies have pushed that group to look overseas. Since April 2011 nearly fifty Chinese cities have imposed property transaction restrictions including severely limiting the number of apartments residents can buy.
One of the other drivers for Chinese investment will be the opening up of tourism markets which will increase the awareness of Western Australia as an opportunity. In 2011, Chinese visitation to WA grew by 57 per cent to 19,000 visitors. Direct services now link Perth to China and outbound travel from China is projected to increase 15-20 per cent per year for the next decade. Given that approximately 432 million Chinese residents are covered under a bilateral travel agreement with Australia, tourism will present many opportunities for Western Australia well beyond that initial visit with the potential for sufficient investment to help ease the shortage of rental properties in the longer term.