New fees will not stop Aussie buyers

Australia remains highly attractive for Singapore property investors looking to expand their property portfolio according to a new report from property investment firm IP Global.

Despite an announcement from Prime Minister Tony Abbott that foreign buyers will be required to pay AU$ 5,000 or more per purchase, these fees are not expected to deter Singaporean investors, according to the real estate firm. Given that it will take time for these measures to be enforced, the company noted that it might see increased investment in the coming months.

It is also likely to spur investment in new and off-plan properties, as these are the only investment properties for overseas investors that are approved by the Foreign Investment Review Board), the company added.

Elizabeth Chu, Senior Investment Manager at IP Global, said: Clearly there are concerns about housing affordability for Australians, and any illegal investment from foreign buyers needs to be addressed.

Yet we expect industry bodies to put up a fight to the fees, especially given the big question mark about whether they will actually improve affordability.

We also need more clarity about how these measures will actually be enforced, in particular whether they will just apply to future purchases or else retrospectively.

The recent interest rate cut in Australia to a record low of 2.25 percent, along with the depreciating Australian dollar, are attracting more Singaporean investors who are now able to benefit from lower mortgages and cheaper borrowing.

Sky-high prices and Singapore property cooling measures have continued to dampen the appeal of the local property market, according to IP Global, leaving Australia to emerge as a favoured alternative in Asia-Pacific.

There is strong evidence of increasing numbers of Singaporean investors buying into Australiasproperty market.

Data from the Foreign Investment Review Board (FIRB) showed that Singapore was the fourth biggest source of foreign investment into Australian real estate in 2013, contributing $2.01 billion worth of assets in total.

Brisbane and Melbourne are the best investment markets for long-term returns, according to the latest analysis from IP Global.

Melbourne has been voted as the worlds most liveable city for the past four years. With 90,000 new residents annually, the citys population is set to double by 2051, driving demand for residential property. Investors with a foothold in this market will see significant returns, with apartment prices having risen by 5.2 percent up to Q3 2014.

Meanwhile Brisbanes successful hosting of the G20 Summit in November has seen the city develop as a key economic hub in Asia. The citys vacancy rate has been pushed down to 2.2 percent, while land values in Brisbanes inner city suburbs rose by between 10 percent and 20 percent last year.

Chu continued: Singapore, along with Hong Kong, is well-known as one of the most expensive cities to invest in property due to the soaring property taxes, particularly for foreign buyers. In contrast, Australia is a transparent and liquid market that is easy to access.

Brisbane and Melbourne are the most important metropolitan areas outside of Sydney.
While Sydney is often the first port of call for Asian buyers, strong price returns in recent years have led to a surge in residential development. Investors should be careful before committing to a market where high prices and increased supply make strong returns difficult to achieve.

While there have been concerns about oversupply in the Australian market particularly in Melbourne this is limited to central areas such as the Docklands and the central business district. We suggest Singapore buyers look slightly further afield to areas between 5km and 10km from the centre.

In Brisbane, we have focused on Fortitude Valley and Newstead, where new developments are providing resort-style living for young residents who want to live close to the CBD. We are now looking to the Inner East Side where recent zoning changes are set to allow new businesses to open and medium-density housing to be built, creating an exciting uplift in an already popular area.

Andrew Batt, International Group Editor ofPropertyGuru Group, wrote this story. To contact him about this or other stories emailandrew@propertyguru.com.sg

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