Australia the next property investment hot spot?

 December 31, 2010 

Australian real estate may present a good investment opportunity next year as a robust economy and a growing shortage of homes underpin prices that, according to analysts, have room to go up still further.

Analysts say that foreigners will be drawn to the market, with Chinese, Singaporean and Malaysian buyers continuing to lead demand. Despite restrictions on foreign buyers of Australian properties, Asian investors are still snapping up homes Down Under, especially in major cities such as Sydney and Melbourne.

“Foreigners do have restrictions. When they are selling, they have to sell to Australian nationals, but this doesn’t seem to affect people,” said Mr Julian Sedgwick, senior associate director for international residential sales at real estate agency Savills.

He said there were 800 enquiries received at Savills over a recent weekend for two or three property launches in Sydney.

“We sold about 25 per cent of the units from one such property and as many as 10 per cent to 15 per cent of the buyers are Asian,” he said.

Prices of Australian homes have risen 56 per cent in the past 10 years. Yet the Housing Industry Association in Australia estimates that the price-to-income ratio is slightly lower today than it was in December 2007.

And options for home buyers are not limited to Sydney and Melbourne. With prices in these two cities reaching record levels – an inner-city one-bedroom home in Sydney currently commands up to A$750,000 ($984,000) – analysts say that it may be worthwhile for foreign home buyers to shift their attention to a city such as Brisbane, where prices are relatively lower.

To ward off the threat of asset bubbles, Australian policy-makers raised interest rates to 4.75 per cent last month.

But analysts say this will not put off Asian investors. Singaporeans, for example, can finance their Australian properties with loans pegged to a lower interest rate.

“We can actually borrow in Singapore dollars, so as a result our interest rate is about 1.5 per cent to 2 per cent,” said Ms Donna Lim, head of overseas projects at HSR International Realtors.

For apartments in the central business district, “you probably would be able to get 6 per cent to 7 per cent, for houses in the suburbs you will probably enjoy 5 per cent rental return; so there’s definitely a positive cash flow here,” she added.

Due to high foreign demand and a lack of new housing supply in key Australian cities, market watchers expect property prices to rise as much as 8 per cent next year. An index of home prices in Australia’s eight capital cities was 5.7-per-cent higher in the three months ended this September, compared with the final quarter of 2009.

Source : Today – 31 Dec 2010