Welcome Guest [Log In] [Register]


Reply
Australian property has become an international commodity - offshore buyers are not going away
Topic Started: 10 Dec 2013, 09:42 PM (998 Views)
Admin
Member Avatar
Administrator

Quote:
 
Australia's residential market has become an international commodity

By Peter Chittenden
Tuesday, 10 December 2013

We are currently in the midst of the strongest residential market since the GFC. Sydney and Melbourne in particular have seen a spectacular jump in market activity over the last three to four months. Auctions are at historic levels both in terms of the number of properties being sold and clearance rates. We are also seeing many new off-the-plan projects attracting what at times is frenetic demand. There are several key facts driving this activity, some of which are long-term and structural going way beyond a traditional market up-turn.

In mid January, looking ahead to 2013 I suggested here interest rates were set to be one of the key influences on every aspect of the residential market. This has proved to be the case with low rates, particularly over the last six months, impacting owner-occupiers and investors but also developers looking to fund new projects. Low rates have helped fuel demand and push prices up, while in many markets there is still a shortage of supply.

As we enter 2014 the question remains as to whether or not we have reached the bottom of the current low interest rate cycle, however seeking an answer to this question will not be any easy task as further cuts might not be good news indicating a much weaker local economy and bad news for employment.

However beyond interest rates, I think that a much bigger factor and one that has received little attention is the internationalisation of the local residential market. Like the share and currency markets, we are now looking at being a part of the worldwide demand for quality residential real estate. Offshore buyers are having a big impact and that trend is not going away any time soon. If Sydney and Melbourne are to be world-ranking cities then we have to accept that offshore demand will continue. Cashed up buyers from Asia in particular are attracted to our markets, often seen as a safe destination but also we are an appealing lifestyle destination.

We should not overlook the appeal of blue skies, fresh air and open space. This offshore interest is not only confined to individual private buyers, but also developers and also now, in a trend I pointed to some 18 months ago we have seen the AMP join with Japan’s banks to enter the local home loan market. And so we see international involvement across all areas of our residential development market. This trend is not new and other countries like New Zealand and the United Kingdom have either introduced or considered some curbs on foreign buyers but the same measures have been suggested for us, and given our very close links with Asia I do not think this is a credible idea.

In the UK prime London residential property has seen a big spike in prices with local officials looking at ways to generate more revenue. The idea is to impose a capital gains tax on foreign owners.

While UK residents have to pay CGT when reselling all but their main home, non-resident property owners do not. For example a UK-based buyer of an investment property or second home for £1m and then sold it for £5m. The UK resident would pay capital gains tax of £1.1m, assuming they were in the top tax bracket. An offshore investor, by contrast, is currently exempt from CGT. The lost revenue is proving tempting as Treasuries look for new revenue, and to some extent this action might also cool some areas of demand.

Offshore buyers are not going away

Offshore interest, no matter what fuels the demand be it lifestyle or investment considerations, is here to stay and just like the floating of the Aussie Dollar 30 years ago, the market may never be the same. Our markets are now considered desirable to a wide range of off-shore buyers and this is a major trend that will impact prices and demand.

Other big factors remain the rapidly changing demographics of our cities and shifts in lifestyle that all combine to create new pressures that will heavily influence markets and how infrastructure is delivered. Both the issues will continue to be very big topics in 2014, alongside how efficiently and where we create new supply.

However there is currently no indication that any sort of new policy measures are planned here to curb off-shore demand or investment. However another big ticket item next year will be the federal government’s tax review and how this might address the very big question of housing affordability, otherwise this issue could shift from a financial policy to one that has far reaching and possibly negative impacts on social policy and cohesion. First time buyers despite very low mortgage rates are now very much absent from the current market, they are being locked out by varied and complex factors.

While offshore demand is a structural change, I think that borrowers of all kinds might also have seen the best of low interest rates, but continued and very spiked demographic changes and the internationalisation of our markets will continue to be the big drivers of apartment demand and development in 2014.

Read more: http://www.propertyobserver.com.au/trends/australia-s-residential-market-has-become-an-international-commodity/2013120966850
Follow OzPropertyForum on Twitter | Like APF on Facebook | Circle APF on Google+
Profile "REPLY WITH QUOTE" Go to top
 
MassPsychology
Default APF Avatar

Sad to see our residential housing market getting sold off to international buyers. Anything to keep "volume" being traded. This is what happens when you treat housing as nothing but a trade-able commodity. I can't wait to see the negative fallout for us future generations, should be interesting...
Profile "REPLY WITH QUOTE" Go to top
 
Bardon
Default APF Avatar



With respect to CGT is you were an Australian resident for tax purposes you would have to pay CGT if you sold an investment property in the UK just the same as you did in NZ or any other country that has a tax treaty with us.. I didn't realise though that foreign buyers were not subject to CGT in Uk tax law though. London has some very rich investment bankers and their sky high salaries are going to have to at least double in the next twelve months as they have to fall under a euro law that requires bonuses to be restricted to 100% of base.
Profile "REPLY WITH QUOTE" Go to top
 
Leodwald of Portsburgh
Member Avatar


Disgusting what this country does to it's young. I hope they realise they are being sold out and rise up. They need to do it soon.
Profile "REPLY WITH QUOTE" Go to top
 
Dr Watson
Member Avatar


BeN
16 Dec 2013, 03:39 PM
Disgusting what this country does to it's young. I hope they realise they are being sold out and rise up. They need to do it soon.
I doubt it. Most are blissfully ignorant of the foreign influence. Many I speak to in their late twenties have given up the ghost. They don't blame the foreigners; they can't even save up a simple deposit. They have resigned themselves to renting. BP's transmutation certainly looks on the money from what I'm hearing and seeing.
Edited by Dr Watson, 16 Dec 2013, 03:51 PM.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
Profile "REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
« Previous Topic · Australian Property Forum · Next Topic »
Reply



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy